America Online 2014 Annual Report Download - page 103

AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Additional Information on Acquisitions
The businesses acquired by the Company during the periods presented herein were all in their early stages of
development. This fact, along with market conditions at the time of acquisition, contributed to purchase prices
that resulted in the allocation of a significant portion of such purchase prices to goodwill.
The amounts assigned to intangible assets were based on the Company’s best estimate of the fair value of
such assets. The Company used an independent valuation specialist to assist in determining the fair value of the
identified intangible assets in significant acquisitions. In most instances, the fair value of the significant
identified intangible assets was estimated by performing a discounted cash flow analysis using the “income”
approach, which represents a level 3 fair value measurement. The income approach includes a forecast of direct
revenues and costs associated with the respective intangible assets and charges for economic returns on tangible
and intangible assets utilized in cash flow generation. Net cash flows attributable to the identified intangible
assets are discounted to their present value at a rate commensurate with the perceived risk. The projected cash
flow assumptions considered contractual relationships, customer attrition, eventual development of new
technologies and market competition.
The useful lives of trade names were estimated based on the Company’s evaluation of the useful lives of
comparable intangible assets purchased under similar circumstances. The useful lives of customer relationships
were estimated based upon the length of the contracts currently in place, probability-based estimates of contract
renewals in the future and natural growth and diversification of the customer base.
In connection with incentive cash compensation arrangements made in connection with acquisitions, the
Company recorded $12.5 million, $5.0 million and $12.3 million in compensation expense for the years ended
December 31, 2014, 2013 and 2012, respectively.
Unaudited pro forma results of operations assuming these acquisitions had taken place at the beginning of
each period are not provided because the historical operating results of the acquired companies were not
significant and pro forma results would not be significantly different from reported results for the periods
presented.
Dispositions and Disposals
Patch
On January 29, 2014 the Company entered into a joint venture with DMEP Corp. dba Hale Global (“Hale
Global”), whereby the Company contributed Patch into a new limited liability company, which is operated and
majority owned by Hale Global subsequent to the closing of the transaction. The Company recorded a loss on
disposition of $3.1 million, which primarily represents the difference between the $12.8 million fair value of the
Company’s 40% retained interest in Patch and the carrying value of contributed net assets. The loss on
disposition is included in the loss on disposal of assets on the Company’s consolidated statements of
comprehensive income. The fair value of the Company’s retained interest in the joint venture is being accounted
for as an equity method investment. Due to the Company’s significant continuing involvement with the joint
venture, the disposed component did not meet the criteria to be classified as a discontinued operation in the
Company’s financial statements.
Sale of Dulles Technology Center
On July 30, 2014, the Company completed the sale of a data center property located in Virginia for cash of
approximately $33.1 million, net of costs to sell the property. The Company recorded an immaterial loss upon the
sale of the assets.
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