America Online 2014 Annual Report Download - page 62

AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
We performed a goodwill impairment analysis as a result of a triggering event in our Patch reporting unit
occurring during the third quarter of 2013. As a result, we recorded an impairment charge of $17.5 million for the
three months ended September 30, 2013, fully impairing the goodwill related to Patch.
No goodwill impairment charges were recorded in 2012.
Income from Licensing of Intellectual Property and Gain on Disposal of Assets, Net
Income from licensing of intellectual property of $96.0 million for the year ended December 31, 2012
reflects the license of our retained patent portfolio to Microsoft in June 2012. The gain on disposal of assets, net
of $962.9 million for the year ended December 31, 2012 includes the gain on the sale of the Sold Patents to
Microsoft of $946.5 million. See “Note 4” in our accompanying consolidated financial statements for additional
information on the patent transaction. Additionally, gain on disposal of assets, net includes the release of a $16.4
million VAT indemnification reserve that was established upon the sale of our legacy access businesses in the
United Kingdom and Germany in 2006 and 2007, respectively.
Operating Income (Loss)
Operating income increased for the year ended December 31, 2014 as compared to the same period in 2013
primarily due to the increase in revenues, declines in restructuring costs and an impairment of goodwill in
September of 2013, partially offset by increases in TAC and amortization of intangible assets.
Operating income decreased for the year ended December 31, 2013 as compared to the same period in 2012
primarily due to the gain on the disposition of the Sold Patents and income from licensing of intellectual property
in 2012, an increase in costs of revenues and restructuring costs and an impairment of goodwill in September
2013 of $17.5 million, partially offset by an increase in revenue and declines in general and administrative
expense.
Other Income Statement Amounts
The following table presents our other income statement amounts for the periods presented (in millions):
Years Ended December 31,
2014 2013
Change
from 2013
to 2014
% Change
from 2013
to 2014 2012
Change
from 2012
to 2013
% Change
from 2012
to 2013
Interest and other income (expense),
net............................ $(9.5) $ (6.6) $ (2.9) (44)% $ 8.2 $(14.8) N/A
Income tax provision ............... 73.2 93.1 (19.9) (21)% 162.4 (69.3) (43)%
Interest and Other Income (Expense), Net
Interest and other expense, net increased for the year ended December 31, 2014 as compared to the same
period in 2013 primarily related to an increase in interest expense related to the Notes and borrowings under the
Credit Facility Agreement and foreign currency transaction losses, partially offset by recognition of $5.4 million
of deferred gain as a result of completion of a professional services agreement related to transition of a
previously disposed asset.
Other expense, net was $6.6 million for the year ended December 31, 2013 as compared to other income,
net of $8.2 million for the same period in 2012. The change was due primarily to the $10.8 million non-cash gain
related to the consolidation of Ad.com Japan recorded in the first quarter of 2012 and to unfavorable foreign
currency impacts of $3.3 million in 2013.
46