America Online 2014 Annual Report Download - page 53

AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Security Incident
On April 28, 2014, we announced a security incident that involved unauthorized access to our network and
systems (the “security incident”).
As a result of our investigation of the security incident, we determined that there was unauthorized access to
information regarding a significant number of user accounts. This information included AOL users’ email
addresses, postal addresses, address book contact information, encrypted passwords and encrypted answers to
security questions that we ask when a user resets his or her password, as well as certain employee information.
We believe that the individuals or entities have used this contact information to send “spoofed” emails that
appeared to come from roughly 2% of our email accounts. There is no indication that the encryption on the
passwords or on the answers to security questions was broken or that the incident resulted in disclosure of users’
financial information, including debit and credit cards, which is also fully encrypted.
We completed the investigation of the security incident in the third quarter of 2014, and we have not
incurred and do not expect to incur a material loss associated with the security incident.
Acquisition of Convertro
On May 6, 2014, we acquired Convertro Inc., a leading attribution modeling technology company that helps
marketers reallocate budgets within their media channels, sites, placements and creatives. The integration of
Convertro technology is expected to enhance the ability of advertisers to customize their audience segments and
establish a map of user journey to a particular event across media channels (e.g., a conversion, completion),
thereby enabling our advertisers to develop a media plan that maximizes return on ad spend across various media
channels.
We acquired Convertro for a total purchase price of $98.6 million, net of cash acquired. We borrowed $75.0
million under our $250 million senior secured revolving credit facility agreement (the “Credit Facility
Agreement”) to facilitate funding of this acquisition.
2014 Stock Repurchase Program
On July 28, 2014, our Board of Directors approved the 2014 Stock Repurchase Program, which authorizes
us to repurchase up to $150 million of our outstanding shares of common stock from time to time over the twelve
months following the announcement of the program, depending on market conditions, share price and other
factors. The repurchases may be made in accordance with applicable securities laws in the open market, in block
trades, pursuant to pre-arranged trading plans or otherwise and may include derivative transactions. The 2014
Stock Repurchase Program may be suspended or discontinued at any time.
During the year ended December 31, 2014, we repurchased a total of 2.5 million of our outstanding shares
of common stock for approximately $98.6 million. Included in the total repurchases were 1.6 million of
repurchases made under our stock repurchase program announced on July 8, 2013 (the “July 2013 Stock
Repurchase Program”) at a weighted-average price of $36.84 per share and 0.9 million of repurchases made
under our 2014 Stock Repurchase Program at a weighted-average price of $42.46 per share.
Sale of Dulles Technology Center
On July 30, 2014, we 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 proceeds were used for general corporate
purposes. We recorded an immaterial loss upon the sale of the assets.
37