America Online 2014 Annual Report Download - page 68

AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Cash held internationally may be repatriated and would be available to be used to fund our domestic
operations. However, repatriation of funds may result in additional tax liabilities. We believe our existing cash
balance in the U.S., cash flows from operations in the U.S. and funds available under the Credit Facility
Agreement, are sufficient to fund our domestic working capital needs.
Summary Cash Flow Information
Our cash flows from operations are driven by net income adjusted for non-cash and non-operating items
such as depreciation and amortization, asset impairments and write-offs, equity-based compensation expense and
other activities impacting net income such as the gains and losses on the sale of assets. Cash flows from investing
activities consist primarily of the cash used in the acquisitions of various businesses, cash used for capital
expenditures and product development costs and cash received from the disposal of assets. Capital expenditures
and product development costs are mainly for the purchase of computer hardware, software, network equipment,
furniture, fixtures and other office equipment. Cash flows from financing activities relate primarily to proceeds
from the issuance of the Notes, borrowings and repayments under the Credit Facility Agreement, repurchases of
common stock, principal payments on capital leases, tax withholdings related to net share settlements of
restricted stock units, proceeds from the exercise of stock options and payment of the Special Cash Dividend in
the fourth quarter of 2012.
Operating Activities
The following table presents cash provided by operating activities for the periods presented (in millions):
Years Ended December 31,
2014 2013 2012
Net income .................................................... $ 122.8 $ 90.6 $ 1,047.7
Adjustments for non-cash and non-operating items:
Depreciation and amortization ................................. 200.3 174.0 176.9
Asset impairments and write-offs ............................... 13.6 30.6 6.1
(Gain) loss on step acquisitions and disposal of assets, net ........... (3.8) (1.5) (975.5)
Amortization of debt discount and issuance costs .................. 6.2 0.3 —
Equity-based compensation ................................... 70.7 47.0 39.5
Deferred income taxes ........................................ 62.2 51.5 124.1
All other, net, including working capital changes ................... (62.3) (73.6) (53.2)
Cash provided by operating activities ................................ $ 409.7 $ 318.9 $ 365.6
Cash provided by operating activities increased $90.8 million for the year ended December 31, 2014, as
compared to the year ended December 31, 2013, primarily due to increased operating income (excluding the
impact of non-cash items), the timing of receipt of a significant prepayment from a large partner in 2014 and
lower employee bonus and deferred compensation payments in 2014, partially offset by timing of other working
capital.
Cash provided by operating activities decreased $46.7 million for the year ended December 31, 2013, as
compared to the year ended December 31, 2012, driven mainly by a decrease in operating income of $65.1
million (excluding the $946.5 million gain on the sale of patents) which was primarily the result of the $96.0
million in cash received from licensing our retained patent portfolio to Microsoft in 2012. Cash provided by
operating activities also declined due to the timing of changes in working capital.
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