America Online 2013 Annual Report Download
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Table of Contents
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Table of contents
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Page 1
... price of such shares on the New York Stock Exchange on June 30, 2013) was approximatelc $2.7 billion. As of Februarc 14, 2014, the number of shares of the Registrant's common stock, par value $0.01 per share, outstanding was 79,453,253. DOCUMENTS INCORPORTTED BY REFERENCE Certain information... -
Page 2
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Page 3
... of Operations Quantitative and Qualitative Disclosures About Market Risk Financial Statements and Supplementarc Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance... -
Page 4
... of Contents TOL INC. INDEX TO CONSOLIDTTED FINTNCITL STTTEMENTS TND SUPPLEMENTTRY DTTT Page Number Report of Independent Registered Public Accounting Firm 62 63 64 65 66 67 76 77 80 84 Consolidated Statements of Comprehensive Income (Loss) for the cears ended December 31, 2013, 2012 and 2011... -
Page 5
... Factors." In addition, we operate a web services companc in a highlc competitive, rapidlc changing and consumer- and technologc-driven industrc. This industrc is affected bc government regulation, economic, strategic, political and social conditions, consumer response to new and existing products... -
Page 6
... of our advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch and MapQuest. The Brand Group also includes co-branded websites owned or operated bc third parties for which certain criteria have been met, including that the internet traffic has... -
Page 7
... and engaging content and provides easc access to important services such as AOL Search and AOL Mail. We seek to continuouslc develop and refine our home page bc offering enhanced features and functionalitc and user interface improvements. • The Huffington Post-an influential news, opinion and... -
Page 8
...services directlc to consumers on the open web and through the Apple App Store, the Google Plac Store, the Amazon Appstore and the Android Market. Additional distribution channels include toolbars, widgets, co-branded portals and websites, mobile aggregators, third-partc websites and social networks... -
Page 9
... basis. We aim to develop our current relationships with publishers and advertisers and continue to drive increased global advertiser investment and publisher growth. AOL Networks provides services and solutions that focus on acquiring inventorc and content from online publishers, adding value... -
Page 10
...Yahoo") and Microsoft Corporation ("Microsoft") are parties to nonexclusive agreements that allow advertising networks operated bc each of the companies to offer each other's premium non-reserved online displac inventorc to their respective customers. This partnership offers advertisers and agencies... -
Page 11
... 15 curated content channels that can be accessed through and experienced across all devices including desktop, mobile, tablet and internet-enabled television. The AOL On Network includes original programming and video content from a large number of scndication partners. • Be On Advertisers use... -
Page 12
... content, products and services included in the Membership Group and Brand Group segments. AOL Properties also include co-branded websites owned or operated bc third parties for which certain criteria have been met, including that the internet traffic has been assigned to us. Third Party Network... -
Page 13
...AOL Properties, based on our agreement that runs through December 31, 2015. In connection with these search services, Google provides us with a share of the revenue generated through paid text-based search advertising and contextual advertising on AOL Properties. For the cear ended December 31, 2013... -
Page 14
... acquisition of Adap.tv, other revenues also includes fees generated from publishers and advertisers using Adap.tv's platform technologc and features, as well as services such as ad serving and hosting. Produgt Development We seek to develop new and enhanced versions of our products and services... -
Page 15
... number of local enterprises. The internet industrc is dcnamic and rapidlc evolving, and new and popular competitors, such as social networking sites, providers of communications tools and providers of advertising products and services, frequentlc emerge. We also compete with the companies listed... -
Page 16
.... We intend to continue to promote and support the AOL brand while we increase our focus on our familc of individual content, product and service brands. We look for strategic opportunities to integrate our brands into high value sponsorships and targeted promotions aimed at defining our core value... -
Page 17
... business ." For geographic area data for the cears ended December 31, 2013, 2012 and 2011, see "Note 12" in our accompancing consolidated financial statements. Seasonality In the fourth quarter, we have historicallc seen a sequential increase in advertising revenues across our segments associated... -
Page 18
... offices at 20 Broad Street, New York, New York 10005. We also maintain an internet web site at www.corp.aol.com. We use our website as a channel of distribution of material companc information. Financial and other information regarding AOL is routinelc posted on and accessible at http://ir.aol.com... -
Page 19
... She previouslc served on the AOL Board of Directors from 2009 until September 2012 and on the board of directors of Crane Co. from 2004 until 2012. Ms. Julie Jacobs Ms. Jacobs, age 47, has served as Executive Vice President, General Counsel and Corporate Secretarc since Mac 2010. Prior to that, Ms... -
Page 20
... served on the AOL Board of Directors from 2009 until March 1, 2013 and on the board of directors of CIT Group Inc. from 2006 until 2009. Mr. Bud Rosenthal Mr. Rosenthal, age 47, has served as Senior Vice President and Chief Executive Officer of the AOL Membership Group since Julc 2013. Prior to... -
Page 21
...access to the advertising inventorc and application programming interfaces of publishers as well as continued robust relationships with brand advertisers and agencies. Our programmatic advertising solutions mac become less attractive, and our results of operations mac suffer, as a result of changes... -
Page 22
... limited circumstances, the exclusive provider of web search and search sponsored links on AOL Properties through December 31, 2015. For the cear ended December 31, 2013, search advertising revenues comprised approximatelc 24.1% of our total advertising revenues. Changes that Google has made and mac... -
Page 23
...advertising services is highlc complex and mac not provide satisfactorc support as usage increases and products and services expand, change and become more complex in the future. In addition, we incur significant costs operating our business with multiple and often contradictorc technologc platforms... -
Page 24
...significant fees to third parties such as operators of third-partc websites, online networks, software companies, device manufacturers, and others to promote or supplc our services to their users. Previouslc, we entered into distribution agreements with computer manufacturers to install our products... -
Page 25
... revenue or otherwise adverselc affect our business. As we acquire and publish more original content, our intellectual propertc mac be increasinglc subject to misappropriation bc others, and the costs to protect and enforce our intellectual propertc rights mac increase. Additionallc, as new... -
Page 26
... our business. Our operations utilize significant amounts of data about our business, consumers, AOL subscribers and our advertising and publishing partners in order to deliver our content, products and services and our advertising solutions. Although we take measures to protect against unauthorized... -
Page 27
..., state and foreign legislative and regulatorc bodies mac expand current or enact new laws regarding data protection and privacc matters. We have posted privacc policies and practices concerning the collection, use and disclosure of user data on our websites. Anc failure, or perceived failure, bc us... -
Page 28
... available on acceptable terms when required, we mac not have sufficient liquiditc and our business mac be adverselc affected. Acquisitions of other businesses could adversely affect our operations and result in unanticipated liabilities. Since Januarc 1, 2013, we acquired companies such as Adap.tv... -
Page 29
... a joint venture partnership mac impact the development and expansion of our offerings. Furthermore, investments in some regions can take a long period to generate an adequate return. In addition, as we expand into new international regions, we mac have limited experience in operating and marketing... -
Page 30
...) increases bc more than 50 percentage points over a rolling three-cear period. To help protect shareholder value and preserve our abilitc to use the tax assets, our Board of Directors (the "Board") adopted a Tax Asset Protection Plan (the "TAPP") to act as a deterrent to anc person acquiring... -
Page 31
...use as corporate offices, sales offices, development centers, data centers and other operations in other locations in the United States and internationallc. Our larger leased sites are located in California, Colorado, District of Columbia, Illinois, Marcland, Massachusetts, New York and Virginia and... -
Page 32
... time over the twelve months following the announcement of the New Repurchase Program, depending on market conditions, share price and other factors. The repurchases mac be made in accordance with applicable securities laws in the open market, in block trades, pursuant to pre-arranged trading plans... -
Page 33
... fees paid in relation to purchases through December 31, 2013. Dividend Poligy On August 26, 2012, we declared the pacment of a special, one-time, cash dividend of $5.15 per share to shareholders of record at the close of business on December 5, 2012 (the "Special Cash Dividend"), which was paid... -
Page 34
... elsewhere in this Annual Report. Prior to December 9, 2009, the effective date of the spin-off, we were a subsidiarc of Time Warner. Our historical financial information included herein mac not necessarilc be indicative of our future financial condition, results of operations and cash flows. In... -
Page 35
...of Contents Years Ended Degember 31, 2013 ($ in millions, exgept per share amounts) 2012 2011 2010 2009 Statement of Comprehensive Ingome (Loss) Data: Revenues: Advertising Subscription Other Total revenues Costs of revenues Operating income (loss) (a) Income (loss) from continuing operations... -
Page 36
... of outstanding equitc-based compensation awards bc application of the treasurc stock method. Ts of Degember 31, 2013 (in millions) 2012 2011 2010 2009 Balange Sheet Data: Cash and equivalents Goodwill Total assets Long-term portion of obligations under capital leases Treasurc stock, at cost... -
Page 37
...on both AOL Properties and the Third Partc Network. Through AOL Networks, we provide third partc publishers with premium products and services intended to make their websites attractive to brand advertisers, such as video and custom content production, in addition to offering ad serving and sales of... -
Page 38
... of our advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch and MapQuest. The Brand Group also includes co-branded websites owned or operated bc third parties for which certain criteria have been met, including that the internet traffic has... -
Page 39
...our properties and our partners. As part of this strategc, we acquired Adap.tv in September of 2013. Advertisers, agencies and publishers use Adap.tv globallc to buc and sell video advertising inventorc both programmaticallc and on a managed-services basis across desktop, mobile and internet-enabled... -
Page 40
...at anc time. The New Repurchase Program does not affect in anc wac the terms of the Original Repurchase Program. Repurchases are subject to market conditions, share price and other factors. The repurchases mac be made in accordance with applicable securities laws in the open market, in block trades... -
Page 41
...retention programs. Individuals who have onlc registered for our free offerings, including subscribers who have migrated from paid subscription plans, are not included in the AOL subscriber numbers. Additionallc, onlc those individuals whose subscription includes AOL-brand dial-up access service are... -
Page 42
... a fixed fee or performance-based contracts in which performance is measured in terms of either "click-throughs" when a user clicks on a companc's advertisement or other user actions such as product/customer registrations, survec participation, sales leads, product purchases or other revenue sharing... -
Page 43
... for the cears ended December 31, 2013, 2012 and 2011 are as follows (in millions): Years Ended Degember 31, 2013 2012 % Change from 2012 to 2013 % Change 2011 from 2011 to 2012 AOL Properties: Displac Search Total AOL Properties $ Third Partc Network Total advertising revenues 610.2 388... -
Page 44
...in ARPU for the cear ended December 31, 2013, which resulted in an increase in subscription revenue of $53.0 million, is primarilc due to price increases related to our value plan strategc that provides additional features and services to subscribers. Subscription revenues declined 12% for the cear... -
Page 45
... costs of revenues. TAC consists of costs incurred through arrangements in which we acquire third-partc online advertising inventorc for resale and arrangements wherebc partners distribute our free products or services or otherwise direct traffic to AOL Properties. TAC arrangements have a number... -
Page 46
... expense of $21.9 million related to our 2010 and 2011 acquisitions. Facilities costs decreased due to consolidation of office space during 2012. TAC increased primarilc due to the increase in Third Partc Network advertising revenues, including video, and increases related to our search marketing... -
Page 47
... a decline in AOL subscribers. These declines were partiallc offset bc an increase in ad tracking and serving expense of $5.4 million due to increased demand and an increase in sales tax expense of $9.6 million relating to the Virginia sales tax settlement in the second quarter of 2012. General and... -
Page 48
... these costs related to involuntarc emplocee terminations. Other Transactions Impacting Operating Income The following table presents other transactions impacting operating income for the periods presented (in millions): Year Ended Degember 31, % Change from 2011 2013 2012 to 2012 % Change from... -
Page 49
... bc the benefit of research and development tax credits. The effective tax rate for the cear ended December 31, 2013 increased compared to the effective tax rate for the period ended December 31, 2012 primarilc due to the tax impact of the 2012 patent transaction with Microsoft which resulted in an... -
Page 50
...the patent sale and license of $15.7 million, as well as proxc contest costs of $8.9 million, $7.6 million of tax settlement expenses and acquisition-related costs of $5.1 million. Adjusted OIBDA increased for the cear ended December 31, 2013 as compared to the cear ended December 31, 2012 primarilc... -
Page 51
...is a summarc of segment operating results for the cears ended December 31, 2013, 2012 and 2011: Years Ended Degember 31, 2013 2012 % Change from 2012 to 2013 % Change 2011 from 2011 to 2012 Revenue: Brand Group Membership Group AOL Networks Corporate and Other Intersegment eliminations Total... -
Page 52
... in part to the decline in the number of domestic AOL subscribers. AOL Networks 2013 vs. 2012 AOL Networks revenue increased primarilc due to growth in the sale of premium formats across our programmatic platform and bc the inclusion of revenue from Adap.tv. AOL Networks revenue includes $78.4 48 -
Page 53
...2012). Growth is being driven primarilc bc an increase in publishers and advertisers utilizing AOL Networks and increased sales of premium packages and products, including video. AOL Networks revenue growth also reflects growth in inventorc from AOL owned and operated sites sold through AOL Networks... -
Page 54
...2013 2012 2011 Net income Adjustments for non-cash and non-operating items: Depreciation and amortization Asset impairments and write-offs (Gain) loss on step acquisitions and disposal of assets, net Equitc-based compensation Deferred income taxes All other, net, including working capital changes... -
Page 55
... sale of patents) which was primarilc the result of the $96 million in cash received from licensing our retained patent portfolio to Microsoft in 2012. Cash provided bc operating activities also declined due to the timing of changes in working capital. Cash provided bc operating activities increased... -
Page 56
... for additional information on our stock repurchase programs and Special Cash Dividend. Free Cash Flow We use Free Cash Flow as a supplemental measure of our performance. We define Free Cash Flow as cash provided bc operating activities, less capital expenditures, product development costs and... -
Page 57
... our reconciliation of Free Cash Flow to cash provided bc operating activities (in millions): Years Ended Degember 31, 2013 2012 2011 Cash provided bc operating activities Less: Capital expenditures and product development costs Less: Principal pacments on capital leases Free Cash Flow $ 318... -
Page 58
... purchasers of assets or operating subsidiaries and other parties related to certain matters, including losses arising out of our breach of agreements or representations and warranties made bc us, services, software, data or content to be provided bc us, taxes, tariffs, our use of services, software... -
Page 59
... statements for additional information. Customer Credit Risk Customer credit risk represents the potential for financial loss if a customer is unwilling or unable to meet its agreed-upon contractual pacment obligations. Credit risk originates from sales of advertising and subscription service... -
Page 60
... revenue based on the gross amount billed to our advertising customers, with the amounts paid to the Third Partc Network website owner (for the advertising inventorc acquired) reported as TAC within costs of revenues, requires a significant amount of judgment based on an analcsis of several factors... -
Page 61
...to Patch. We performed our annual goodwill impairment test for the Brand Group, AOL Networks and Membership Group reporting units as of December 1, 2013. We determined the fair value for each of the reporting units using an income approach, or discounted cash flow ("DCF") method. The reasonableness... -
Page 62
... over our long-term planning horizon as we focus our resources on our core competitive strengths in web and local content production, advertising and paid services while expanding the distribution of our content, product and service offerings on multiple platforms and digital devices, including on... -
Page 63
... of tax laws and regulations. In the normal course of business, our tax returns are subject to examination bc various taxing authorities. Such examinations mac result in future tax and interest assessments bc these taxing authorities. In determining our tax provision for financial reporting purposes... -
Page 64
...exchange gains and losses are not material to our earnings in 2013, 2012 and 2011. At December 31, 2013, while the majoritc of our cash and accounts receivable balances were denominated in U.S. dollars, cash and accounts receivable denominated in foreign currencies made up approximatelc 19% of total... -
Page 65
Table of Contents ITEM 8. FINTNCITL STTTEMENTS TND SUPPLEMENTTRY DTTT 61 -
Page 66
Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC TCCOUNTING FIRM The Board of Directors and Shareholders of AOL Inc. We have audited the accompancing consolidated balance sheets of AOL Inc. as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (... -
Page 67
... (LOSS) (In millions, exgept per share amounts) Years Ended Degember 31, 2013 2012 2011 Revenues: Advertising Subscription Other Total revenues Costs of revenues General and administrative Amortization of intangible assets Restructuring costs Goodwill impairment charge Income from licensing of... -
Page 68
... shares outstanding as of December 31, 2013 and 110.1 million shares issued and 76.6 million shares outstanding as of December 31, 2012 Additional paid-in capital Accumulated other comprehensive income (loss), net Accumulated deficit Treasurc stock, at cost, 34.9 million shares at December 31, 2013... -
Page 69
... Accrued expenses Deferred revenue Other balance sheet changes (104.5) Cash provided by operating agtivities Investing Tgtivities Investments and acquisitions, net of cash acquired Proceeds from disposal of assets, net Capital expenditures and product development costs Cash (used) provided by... -
Page 70
Table of Contents TOL INC. CONSOLIDTTED STTTEMENTS OF EQUITY (In millions) Tdditional Paid-In Balange at Degember 31, 2010 Net Income Foreign currencc translation adjustments Common Stogs Shares Tmount 106.7 $ 1.1 Tggumulated Other Comprehensive Ingome (Loss) Treasury Tggumulated Defigit Stogs... -
Page 71
...'s advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch, and MapQuest. The Brand Group also includes co-branded websites owned or operated bc third parties for which certain criteria have been met, including that the internet traffic has... -
Page 72
... allocable to a specific segment such as tax settlements and other general business costs. Basis of Presentation Basis of Consolidation The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows of AOL and all voting interest entities in which... -
Page 73
...in terms of either "click-throughs" when a user clicks on a companc's advertisement or other user actions such as product/customer registrations, survec participation, sales leads, product purchases or other revenue sharing relationships. Gross versus Net Revenue Recognition In the normal course of... -
Page 74
...its subscription services in the form of monthlc or annual fees paid bc subscribers to its service offerings, and such revenues are recognized on a straight-line basis as the service is provided. Traffic Acquisition Costs AOL incurs costs through arrangements in which it acquires online advertising... -
Page 75
... financial statements. The testing of goodwill for impairment is required to be performed at the level referred to as the reporting unit. During 2013, the Companc had four reporting units for purposes of the goodwill impairment test; the Brand Group, the Membership Group, AOL Networks and... -
Page 76
... charges recorded in 2012 and 2011 related primarilc to asset write-offs in connection with facilitc consolidation, computer retirements and capitalized internal-use software project terminations. Income Taxes Income taxes are presented in the consolidated financial statements using the asset and... -
Page 77
... to credit risk bc maintaining such deposits with high qualitc financial institutions that management believes are creditworthc. The Companc's exposure to customer credit risk relates primarilc to advertising customers and individual subscribers to AOL's subscription services, and is dispersed among... -
Page 78
... upgrades and enhancements and are related to both AOL's internal scstems (such as billing and accounting) and AOL's user-facing internet offerings, are included in propertc and equipment, net in the consolidated balance sheet. For the cears ended December 31, 2013, 2012, and 2011, AOL capitalized... -
Page 79
... 31, 2013, 2012, and 2011, respectivelc. These costs consist primarilc of personnel and related costs that are incurred related to the development of software and user-facing internet offerings that do not qualifc for capitalization. Leases The Companc leases operating equipment and office space in... -
Page 80
... diluted net income attributable to AOL common stockholders per common share (in millions, except per share amounts): Years Ended Degember 31, 2013 2012 2011 Net income attributable to AOL Inc. common stockholders Shares used in computing basic income per common share Dilutive effect of equitc... -
Page 81
...changes in the Companc's goodwill during the cears ended December 31, 2013 and 2012 is as follows (in millions): Degember 31, Translation adjustments Tllogations at Degember 1, 2011 Brand Group Gross Goodwill Tgquisitions 2012... (3.7) Impairments Net Goodwill Corporate and Other Gross Goodwill ... -
Page 82
... increase the risk of a goodwill impairment in the future. 2012 and 2011 Goodwill Impairment Analysis As a result of a change in management structure described in the fourth quarter of 2012, the Companc concluded that it had four reporting units; the Brand Group, the Membership Group, AOL Networks... -
Page 83
... assets as of December 31, 2013, the estimated amortization expense for each of the succeeding five cears ending December 31 is as follows (in millions): 2014 $ 53.8 43.4 2015 2016 2017 2018 Total 35.1 33.4 24.6 $ 190.3 The amounts above mac varc as acquisitions and dispositions occur in the... -
Page 84
... and sell video advertising inventorc across desktop, mobile, and connected TV platforms. This acquisition is expected to enhance the Companc's offerings to publishers and advertisers, and this expectation along with market conditions at the time of acquisition contributed to a purchase price that... -
Page 85
... web content and Bucsight, Inc. ("Bucsight"), a companc that operates a targeted advertising platform which uses machine learning technologc to allow for real time optimization of advertising campaigns. The aggregate purchase price of these acquisitions was $27.8 million, net of cash acquired. AOL... -
Page 86
... Post") for a purchase price of $295.5 million, net of cash acquired. The Huffington Post is an innovative internet source of online news, analcsis, commentarc, entertainment and communitc engagement. In addition to the market conditions at the time of acquisition and the earlc stage of development... -
Page 87
... FINTNCITL STTTEMENTS Tdditional Information on Tgquisitions The businesses acquired bc the Companc during the periods presented herein were all in their earlc stages of development. This fact, along with market conditions at the time of acquisition, contributed to purchase prices that resulted in... -
Page 88
... provides content personalization technologc and publisher solutions to create relevant consumer and advertiser experiences. Patch On Januarc 29, 2014, the Companc entered into a joint venture with DMEP Corp. dba Hale Global ("Hale Global") wherebc the Companc contributed Patch into a new limited... -
Page 89
...Expense Interest expense was $6.5 million, $5.9 million and $6.5 million for the cears ended December 31, 2013, 2012 and 2011, respectivelc, and is included in other income (loss), net on the consolidated statements of comprehensive income (loss). The weighted-average interest rate on AOL's capital... -
Page 90
... Facilitc Agreement for general corporate purposes. No amounts have been borrowed under the Credit Facilitc Agreement to date. NOTE 6-INCOME TTXES The components of income (loss) from continuing operations before income taxes were as follows (in millions): Years Ended Degember 31, 2013 2012 2011... -
Page 91
Table of Contents TOL INC. NOTES TO THE CONSOLIDTTED FINTNCITL STTTEMENTS The items accounting for the difference between income tax expense computed at the federal statutorc rate of 35% and the provision for income taxes were as follows: Years Ended Degember 31, 2013 2012 2011 U.S. federal ... -
Page 92
... annual use limitations under Section 382 of the Internal Revenue Code and applicable state tax laws. If not utilized, these federal, state and local net operating loss carrcforwards will expire between 2014 and 2033. AOL had $1,251.7 million and $1,254.6 million of U.S. federal and foreign capital... -
Page 93
... in Ingome Taxes Changes in unrecognized tax benefits, excluding the related accrual for interest and penalties, from Januarc 1 to December 31 are set forth below (in millions): Years Ended Degember 31, 2013 2012 2011 Beginning balance Increases for current cear tax positions Increases for prior... -
Page 94
... at anc time. The New Repurchase Program does not affect in anc wac the terms of the Original Repurchase Program. Repurchases will be made in accordance with applicable securities laws in the open market, in block trades, pursuant to pre-arranged trading plans, private transactions, and mac include... -
Page 95
... Companc's financial statements as of and for the cear ended December 31, 2013. Tggelerated Stogs Repurghase Tgreement On August 26, 2012, the Companc entered into a fixed dollar collared accelerated stock repurchase agreement with Barclac's Capital Inc. ("Barclacs"), as agent for Barclacs Bank PLC... -
Page 96
... to time through August 2012. Repurchases were subject to market conditions, share price and other factors. Repurchases were made in accordance with applicable securities laws in the open market or in private transactions and mac have included derivative transactions, or pursuant to anc trading plan... -
Page 97
... feature, a 15% stock purchase discount from market price which is significant and incremental, and the fact that plan terms are not available to all common stock holders. A maximum of 9.4 million shares is available for issuance pursuant to the ESPP as of December 31, 2013. Acquisition of Adap.tv... -
Page 98
... information on the acquisition of The Huffington Post and related stock conversion. Equity-Based Compensation Expense Compensation expense recognized bc AOL related to its equitc-based compensation plans is as follows (in millions): Years Ended Degember 31, 2013 2012 2011 Stock options... -
Page 99
... holders of outstanding stock options as of November 30, 2012, in consideration for the decrease in value of options due to the $5.15 one-time special dividend that option holders were not entitled to receive. As of December 31, 2013, 8.7 million shares of AOL common stock were available for future... -
Page 100
.... Total fair value of shares vested during the cears ended December 31, 2013, 2012 and 2011 was $28.2 million, $15.5 million and $24.7 million, respectivelc. NOTE 9-RESTRUCTURING COSTS 2013 Restrugturing Costs As part of the Companc's continuing effort to reduce its expenses and invest in areas of... -
Page 101
... be paid through 2016. NOTE 10- COMMITMENTS TND CONTINGENCIES Commitments AOL's net rent expense was $33.0 million, $35.2 million and $39.6 million for the cears ended December 31, 2013, 2012 and 2011, respectivelc. The Companc has long-term lease commitments for office space in various locations... -
Page 102
... CURRENT LITBILITIES Accrued expenses and other current liabilities consist of (in millions): Degember 31, 2013 2012 TAC Costs of revenues (excluding TAC) Taxes General and administrative costs Restructuring liabilities Rent and facilities expense Network and related costs Member support services... -
Page 103
... of AOL's advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch and MapQuest. The Brand Group also includes co-branded websites owned or operated bc third parties for which certain criteria have been met, including that the internet traffic... -
Page 104
... segment. Segment information for the cears ended December 31, 2013, 2012 and 2011 is as follows (in millions): Brand Membership Group Group TOL Networss Corporate and Other Consolidated Total 2013 Revenues from external customers Advertising Subscription Other Revenues from transactions... -
Page 105
...patent sale and return of the related proceeds to shareholders of $15.7 million, costs related to the proxc contest of $8.9 million, expense relating to the Virginia sales tax settlement of $7.6 million and acquisition-related costs of $5.1 million. Special items for the cear ended December 31, 2011... -
Page 106
... QUTRTERLY FINTNCITL DTTT (Unaudited) Margh 31, June 30, Quarter Ended September 30, Degember 31, 2013 Revenues: Advertising Subscription Other Total revenues Costs of revenues Operating income (a) Net income Net income attributable to AOL Inc. $ 359.2 165.8 13.3 538.3 393.1 49.9 25.6 $ 25... -
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Table of Contents ITEM 9. None. CHTNGES IN TND DISTGREEMENTS WITH TCCOUNTTNTS ON TCCOUNTING TND FINTNCITL DISCLOSURE 103 -
Page 108
... the supervision of, our Chief Executive Officer and Chief Financial Officer and effected bc the Board, management and other personnel to provide reasonable assurance regarding the reliabilitc of our financial reporting and the preparation of financial statements for external purposes in accordance... -
Page 109
... Accounting Oversight Board (United States), the consolidated balance sheets of AOL Inc. as of December 31, 2013 and 2012, and the related consolidated statements of comprehensive income (loss), equitc, and cash flows for each of the three cears in the period ended December 31, 2013 and our report... -
Page 110
Table of Contents ITEM 9B. None. OTHER INFORMTTION 106 -
Page 111
... of Ethics for Our Senior Executive and Senior Financial Officers. A copc of the Code is publiclc available on our website at http://corp.aol.com/ . Amendments to the Code or anc grant of a waiver from a provision of the Code requiring disclosure under applicable SEC rules will also be disclosed on... -
Page 112
... Finangial Statements The Financial Statements listed in the Index to Consolidated Financial Statements and Supplementarc Data, filed as part of this Annual Report. (a)(2) Finangial Statement Sghedules All financial statement schedules are omitted as the required information is not applicable or... -
Page 113
... registrant has dulc caused this report to be signed on its behalf bc the undersigned, thereunto dulc authorized, on Februarc 19, 2014. AOL INC. Bc Name: Title: /s/ Karen Dckstra Karen Dysstra Chief Finangial and Tdministrative Offiger (Principal Financial Officer) POWER OF TTTORNEY KNOW ALL... -
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... of Contents TOL INC. SIGNTTURES Signature Title Date /s/ Hugh F. Johnston Hugh F. Johnston Director Februarc 19, 2014 Februarc 19, 2014 Februarc 19, 2014 Februarc 19, 2014 Februarc 19, 2014 /s/ Dawn G. Lepore Dawn G. Lepore Director /s/ Patricia E. Mitchell Patrigia E. Mitghell Director... -
Page 115
....tv, Inc. and Shareholder Representative Services LLC, a Colorado limited liabilitc companc, dated as of August 5, 2013. 8-K 2.1 9/6/13 2.4 Agreement and Plan of Merger Bc and Among AOL Inc., Headline Acquisition Corporation, TheHuffingtonPost.com, Inc. and Shareholder Representative Services... -
Page 116
... of Restricted Stock Units Agreement (Version 2), effective December 9, 2010. 2/25/11 4/20/12 10.21** 10.22** 10.23** Amended and Restated AOL Inc. 2010 Stock Incentive Plan. DEFC14A adap.tv, Inc. 2007 Stock Incentive Plan. AOL Inc. 2013 Adap.tv Acquisition Stock Incentive Plan, as amended and... -
Page 117
...com, Inc. Long-Term Incentive Plan, as amended as of Februarc 28, 2011. AOL Inc. Long-Term Incentive Plan for the Emplocees of The Huffingtonpost Media Group, as amended and restated, effective March 7, 2011. X S-8 4.4 3/7/11 10.29** 10.30** AOL Inc. 2013 Annual Bonus Plan - U.S. 2011 Directors... -
Page 118
... Asset Purchase Agreement, bc and between AOL Inc. and Microsoft Corporation, dated as of April 5, 2012. Intellectual Propertc Matters Agreement, between AOL Inc. and Microsoft Corporation, dated as of June 15, 2012. Amended and Restated Interactive Marketing Agreement between AOL LLC and Google Inc... -
Page 119
Table of Contents TOL INC. EXHIBIT INDEX Exhibit Filed Filing Number Exhibit Desgription Herewith Form Exhibit Date 10.64* Third Amendment to the IMA, dated April 7, 2004. Amend. 3 to Form 10 Amend. 3 to Form 10 Amend. 3 ... -
Page 120
10.82* Twentc-First Amendment to the IMA, dated November 1, 2008. Amend. 3 to Form 10 10.44 11/6/09 115 -
Page 121
...of the Registrant Consent of Independent Registered Public Accounting Firm. X X X X X Certification of Principal Executive Officer pursuant to Section 302 of the SarbanesOxlec Act of 2002, with respect to the Registrant's Annual Report on Form 10-K for the fiscal cear ended December 31, 2013. 116 -
Page 122
... Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxlec Act of 2002, with respect to the Registrant's Annual Report on Form 10-K for the fiscal cear ended December 31, 2013.†Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Statements of Operations... -
Page 123
Exhibit 10.23 AOL INC. 2013 ADAP.TV ACQUISITION STOCK INCENTIVE PLAN as Amended and Restated, effective September 5, 2013 -
Page 124
TABLE OF CONTENTS Page SECTION 1. 1.1 1.2 SECTION 2. 2.1 2.2 2.3 2.4 BACKGROUND AND PURPOSE. Background. Purpose. DEFINITIONS. "Affiliate" "Board" "Award" "Award Agreemenn" "Cause" "Change in Connrol" "Code" "Comminnee " "Company" "Consulnann " "Disabiliny" "Employee " "Employmenn " "Exchange Acn"... -
Page 125
...of Righns WITHHOLDING TAXES. General Share Winhholding Cashless Exercise/Pledge Onher Forms of Paymenn 11 11 11 11 12 12 12 12 13 13 13 13 13 ii SECTION 11. SECTION 12. SECTION 13. 13.1 13.2 13.3 SECURITIES LAW REQUIREMENTS. NO RETENTION RIGHTS. DURATION AND AMENDMENTS. Term of nhe Plan Righn no... -
Page 126
...14. 14.1 14.2 14.3 14.4 Section 409A. 14.5 SECTION 15. 15.1 15.2 15.3 In General Elecnive Deferrals Applicable Requiremenns Denermining "Connrolled Group" Specified Employees; Paymenn Delay Miscellaneous 14 14 14 14 15 15 15 15 15 15 iii Successors and Assigns Onher Benefin Plans Choice of Law -
Page 127
.... 2013 ADAP.TV ACQUISITION STOCK INCENTIVE PLAN as Amended and Restated, effective September 5, 2013 SECTION 1. BACKGROUND AND PURPOSE. 1.1 Background. On August 5, 2013, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement") with Adap.tv, Inc., a Delaware corporation... -
Page 128
... Board of Directors of the Company, as constituted from time to time. "Award" means an Option or Restricted Shares awarded or acquired pursuant to the Plan. "Award Agreemenn" means a Stock Option Agreement or Restricted Shares Agreement. 2.5 "Cause" means, unless otherwise defined in an applicable... -
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...and such services are not performed in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote or maintain a market for the Company's securities. "Disabiliny" means, unless defined in an employment agreement between the Company or an... -
Page 130
... Director (other than a director of the Company or a Subsidiary) shall constitute a termination of Employment hereunder. 2.14 "Exchange Acn" means The Securities Exchange Act of 1934, as amended, or any successor thereto. "Exercise Price" means the amount for which one Share may be purchased... -
Page 131
...24 "Plan" means the AOL Inc. 2013 Adap.tv Acquisition Stock Incentive Plan, as amended from time to time. "Purchase Price" means the consideration, if any, for which one Share of Restricted Shares may be acquired under the Plan (other than upon exercise of an Option). "Purchaser" means a person to... -
Page 132
... Shares. The number of Shares which are subject to Options or other rights outstanding at any time shall not exceed the number of Shares which then remain available for issuance under the Plan. The Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares... -
Page 133
... until such time as all applicable restrictions lapse. 6.5 Dividends. Dividends paid on any Restricted Shares may be paid directly to the Participant, withheld by the Company subject to vesting of the Restricted Shares pursuant AOL INC. 2013 A DAP.TV A CQUISITION STOCK INCENTIVE PLAN -7- -
Page 134
.... Exercisabiliny. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable and shall provide other terms and conditions as may be determined by the Committee. Except as otherwise provided in the AOL INC. 2013 A DAP.TV A CQUISITION STOCK... -
Page 135
... any of the following): (i) changing the terms of an Option to lower its exercise price; (ii) any other action that is treated as a "repricing" under generally accepted accounting principles; and (iii) repurchasing for cash or canceling an Option at a time when its exercise price is greater than the... -
Page 136
... the Plan or pursuant to outstanding Awards, (ii) the Exercise Price under each outstanding Option, (iii) the price of Shares subject to any Company right of repurchase or reacquisition, and/or (iv) any other affected terms of such Awards. AOL INC. 2013 A DAP.TV A CQUISITION STOCK INCENTIVE PLAN -10... -
Page 137
... the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. SECTION 10. WITHHOLDING TAXES. 10.1 General. An... -
Page 138
... it necessary to comply with any applicable securities law, or the requirements of any securities exchange or other form of securities market upon which Shares may be listed, the Committee may impose any restriction on Shares acquired pursuant to Awards under the Plan as it may deem advisable. All... -
Page 139
...of the Company's stockholders unless it (i) increases the number of Shares available for issuance under the Plan (except as provided in Section 9) or (ii) materially expands the class of persons who are eligible for the grant of Options or the award or sale of Restricted Shares. Without limiting the... -
Page 140
... or at a time set forth in Treas. Reg. § 1.409A-3. Generally, such events and times include: a Participant's separation from service; a Participant's becoming disabled; a Participant's death; a time or a fixed schedule specified in the Plan (including an Award Agreement); a change in the ownership... -
Page 141
... and all disputes between a Participant and the Company and an Affiliate relating to an Award granted following the Effective Date shall be brought only in a state or federal court of competent jurisdiction sitting in Manhattan, New York. AOL INC. 2013 A DAP.TV A CQUISITION STOCK INCENTIVE PLAN -15- -
Page 142
... HUFFINGTONPOST MEDIA GROUP As Amended and Restated, effective March 7, 2011 ARTICLE 1 BACKGROUND AND PURPOSE OF THE PLAN 1.1 Background . On February 6, 2011, the Company entered into an Agreement and Plan of Merger (the "Merger Agreement" ) with Headline Acquisition Corp., a Delaware corporation... -
Page 143
... or reclassification of Shares, or any other similar change in the number of outstanding Shares, then the maximum aggregate number of Shares available for Awards under Section 2.1 of the Plan and any other limitation under this Plan on the maximum number of Shares issuable to an individual... -
Page 144
... by the Committee in its sole discretion: (i) General Financial Objectives : Increasing the HuffingtonPost's net sales; Achieving a target level of earnings (including gross earnings; earnings before certain deductions, such as interest, taxes, depreciation, or amortization; or earnings per... -
Page 145
...to the provisions of the Plan, the type of Option, term, exercise price, vesting schedule, and other conditions and limitations applicable to each Option shall be as determined by the Committee and shall be stated in the Award Agreement. 5.2 Type of Option. (a) Each Option shall be designated in the... -
Page 146
... exercise price is canceled. (d) $100,000 Limit for Incentive Stock Options . Notwithstanding an Option's designation, to the extent that Incentive Stock Options are exercisable for the first time by the Participant during any calendar year with respect to Shares whose aggregate Fair Market Value... -
Page 147
... gross sales price at which the broker sold the Shares to pay the exercise price. 5.5 Exercise of Option . (a) Procedure for Exercise. Any Option granted hereunder shall be exercisable according to the terms of the Plan and at such times and under such conditions as set forth in the Award Agreement... -
Page 148
... to be a Service Provider while holding such unvested Shares, the Company shall have the right to repurchase any or all of those unvested Shares at a price per share equal to the lower of (i) the exercise price paid per Share, or (ii) the Fair Market Value per Share at the time of repurchase. The... -
Page 149
...the end of the Tax Year in which the Period of Restriction ends. 7.5 Voting Rights. During the Period of Restriction, Service Providers holding Shares of Restricted Stock granted hereunder may exercise full voting rights with respect to those Shares, unless otherwise provided in the Award Agreement... -
Page 150
... Section 10.5 of the Plan, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of the underlying Shares specified in the Award Agreement, shall be delivered to the Participant as soon as practicable after the end of the applicable Period of Restriction, and... -
Page 151
... any enforceable agreement between the Service Provider and the Company. 10.3 No Fractional Shares . No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities, or other property shall be paid or transferred... -
Page 152
... by the Company on the Effective Date. 11.2 Termination of the Plan. The Plan shall terminate upon the earliest to occur of (i) March 24, 2018; (ii) the date that is 10 years after the Plan was approved by the HuffingtonPost's stockholders; (iii) the date on which all Shares available for issuance... -
Page 153
... (such as a capital adjustment, reorganization, or merger) or the financial statements of the Company or an Affiliate, or (b) any changes in Applicable Laws or accounting principles. By way of example, the power to adjust Awards shall include the power to suspend the exercise of any Option or Stock... -
Page 154
.... To the extent that any person acquires a right to receive payments from the Company (or an Affiliate) pursuant to an Award, such right shall be no more secure than the right of any unsecured general creditor of the Company (or the Affiliate, as applicable). 12.8 Headings. Headings are given to... -
Page 155
...engaged by the HuffingtonPost to render services to the Company. (k) "Employee" means any person who is an employee, as defined in Section 3401(c) of the Code, of the HuffingtonPost. Neither service as a member of the board of directors nor payment of a director's fee by the HuffingtonPost shall be... -
Page 156
... who is an "executive officer" of the Company (as defined by Rule 3b-7 under the Exchange Act). (n) "Fair Market Value" means, on a given date, (i) if there should be a public market for the Shares on such date, the closing sale price of the Shares on the New York Stock Exchange ("NYSE") Composite... -
Page 157
... the Fair Market Value of a Share on the date the Award is granted, as described in Article 6 of the Plan. (aa) "Tax Year" means the Company's taxable year. (bb) "Termination of Service" means the date an individual ceases to be a Service Provider. Unless the Committee or a Company policy provided... -
Page 158
... services for Company at Company's New York, New York office, subject to such travel as may be required in the performance of Executive's duties. 2. Paragraph 4A of the Employment Agreement is hereby replaced with the following: Base Salary . During the Employment Term and effective as of July... -
Page 159
...for the period from January 1, 2013 through June 30, 2013 to reflect Executive's target bonus opportunity and base salary prior to July 1, 2013. 4. A new subsection 4D(iv) is hereby added to Paragraph 4D of the Employment Agreement : Promotional Equity Grant. (a) Company shall grant to Executive an... -
Page 160
... following the end of a three-year performance period, commencing January 1, 2013, provided, that Executive is continuously employed with Company from the grant date to the applicable vesting date. Except as may be otherwise provided in the applicable award agreement, any Performance Share that is... -
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8. Employment Agreement Terms. Except as provided in this First Amendment, all terms and conditions of the Employment Agreement shall remain in effect and shall not be altered by this First Amendment. (Signature page to First Amendment follows ) 4 -
Page 162
... WHEREOF, the parties hereto have executed this First Amendment as of the date first written above. AOL INC. By: /s/ Julie Jacobs Name: Julie Jacobs Title: EVP and General Counsel EXECUTIVE /s/ Karen Dykstra Karen Dykstra Executive Vice President and Chief Financial and Administrative Officer 5 -
Page 163
... and between AOL Inc., a Delaware corporation ("Company"), and Julie Jacobs ("Executive") is made and entered into as of November 14, 2013 (the "Effective Date"). WHEREAS , Executive and Company entered into an employment agreement dated as of June 11, 2010, as first amended as of March 30, 2011, as... -
Page 164
... the end of a three-year performance period, commencing January 1, 2013 , provided, that Executive is continuously employed with Company from the grant date to the applicable vesting date. Except as may be otherwise provided in the applicable award agreement, any Additional Performance Share that... -
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5. Employment Agreement Terms. Except as provided in this Fourth Amendment, all terms and conditions of the Employment Agreement shall remain in effect and shall not be altered by this Fourth Amendment. (Signature page to Fourth Amendment follows) 3 -
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IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment as of the date first written above. AOL INC. By: Name: Title: /s/ Karen Dykstra Karen Dykstra Chief Financial Officer EXECUTIVE /s/ Julie Jacobs Julie Jacobs Executive Vice President and General Counsel 4 -
Page 167
....1806 www.google.com 1/13/2012 VIA FACSIMILE AND FIRST CLASS MAIL Julie Jacobs General Counsel Aol, Inc. 22000 AOL Way Dulles, Virginia 20166 Re: Listed Company [****] Notification Dear Julie, Pursuant to the change-of-control provisions in agreements between AOL and Google ("Change of Control... -
Page 168
...such successors and assigns) (all of the above, " Named Companies ")." Kind regards, Google, Inc. cc: President for AOL Media Networks AOL Deputy General Counsel AOL Global Operations Limited AOL LLC Robert Hickernell, Vice President, AOL Search Paul Griffith, Senior Director, Business Development -
Page 169
...Services, Inc. AOL Ventures I, LLC AOL Holdings (Lux) S.Ã r.l. European Holdings S.Ã r.l AOL (UK) Limited AOL Europe Holdings (2) & Cie S.e.n.c. (Trading as "Be On" and "Adap.tv") AOL Europe Holdings (2) Media & Cie S.e.n.c. (Trading as "TheHuffingtonPost International") Le Huffington Post SAS AOL... -
Page 170
...Plan; of our reports dated February 19, 2014, with respect to the consolidated financial statements of AOL Inc. and the effectiveness of internal control over financial reporting included in this Annual Report (Form 10-K) of AOL Inc. for the year ended December 31, 2013. /s/ Ernst & Young LLP New... -
Page 171
..., the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant's other certifying officer... -
Page 172
...31.2 CERTIFICATIONS I, Karen Dykstra, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2013 of AOL Inc.; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary... -
Page 173
...OF 2002 In connection with the Annual Report on Form 10-K for the year ended December 31, 2013 of AOL Inc. ("the Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section... -
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