America Online 2011 Annual Report

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AOL Inc. (AOL)
10-K
Annual report pursuant to section 13 and 15(d)
Filed on 02/24/2012
Filed Period 12/31/2011


Table of contents

  • Page 1
    AOL Inc. (AOL) 10-K Annual report pursuant to section 13 and 15(d) Filed on 02/24/2012 Filed Period 12/31/2011

  • Page 2
    Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended ...

  • Page 3
    ... Index i 105 106 108 Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial ... Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 104 104 104 104 104 Market for Registrant's ...

  • Page 4
    ... AND SUPPLEMENTARY DATA Page Number Report of Independent Registered Public Accounting Firm Consolidated ... Share Note 3: Goodwill and Intangible Assets Note 4: Business Acquisitions, Dispositions and Other ... Other Current Liabilities Note 12: Related Party Transactions Note 13: Segment Information ...

  • Page 5
    ... addition, we operate a web services company in a highly competitive, rapidly changing and consumer- and technology-driven industry. This ...in the capital markets; our ability to access the capital markets for debt securities or bank financings; and the impact of "cyber warfare" or terrorist acts and ...

  • Page 6
    ...audience. Our business spans online content, products and services that we offer to consumers, publishers and advertisers. We are focused ...by creating high quality content, products and services at scale and providing valuable online advertising services on both our owned and operated properties and ...

  • Page 7
    ... publisher of relevant and engaging online content and provider of engaging consumer products and services, by utilizing open and highly scalable publishing platforms and content management systems. In addition, we have extended and ...

  • Page 8
    ... utilize publishing platforms and content management systems that are designed to scale in a cost-effective ... in new markets. Search and Contextual We offer AOL Search on AOL Properties.... We have developed and acquired platforms that are designed to facilitate the production, aggregation, distribution...

  • Page 9
    ..., including adding or canceling a product or service. AOL continues to develop and offer other paid services as a way to attract, engage and serve consumers. Currently, the majority of the consumers for our paid services products are also access subscribers. The revenue related to ...

  • Page 10
    .... In addition to our content, products and services that are available to all online consumers, an AOL-brand access subscription ... high-speed broadband internet connections, the fact that a significant amount of online content, products and services has been optimized for use with broadband internet ...

  • Page 11
    ...As part of our relationship with Google, we have expanded the alliance to include the provision of mobile search and mobile search advertising services to AOL. AOL and Google also have a video partnership that features AOL's video content on YouTube. ...

  • Page 12
    .... We currently market our offerings to publishers on the Third Party Network under the brand "Advertising.com." .... We aim to develop our current relationships with publishers and advertisers and continue to expand the number of publishers and advertisers we serve through the products and services we ...

  • Page 13
    ... and universities. Product Development We seek to develop new and enhanced versions of our products and services for our consumers, publishers and advertisers. While in the past we have relied primarily on our own proprietary technology to...

  • Page 14
    ... advertising products, technology and services and demand side-platforms and other aggregators of third-party advertising inventory. We... competitors, such as social networking sites, providers of communications tools and providers of advertising services, frequently emerge. Government Regulation and ...

  • Page 15
    ...Contents • • • The PROTECT Our Children Act of 2008, which requires online services to report and... of electronic communications. The Children's Online Privacy Protection Act of 1998 and the Federal Trade... other current online advertising practices could adversely affect our business. Marketing...

  • Page 16
    ...in primarily Spanish-speaking regions. We offer internet access service under the AOL brand in the United States, Puerto Rico ... average monthly churn of domestic AOL-brand access subscribers (the number of subscribers that terminate or cancel our services, factoring in new and reactivated subscribers...

  • Page 17
    Table of Contents WHERE YOU CAN FIND MORE INFORMATION We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Unless otherwise stated herein, these...

  • Page 18
    ... his career by co-founding and running a newspaper based in Boston, Massachusetts. Mr. Armstrong is a trustee of Lawrence Academy and is a current Board member and former Chair of the Ad Council, a non-profit organization. Mr. Arthur Minson Mr. Minson, ...

  • Page 19
    ... revenues. If we are unable to successfully implement our strategic plan and grow the earnings generated by our online advertising services, we may not be able to support our business in the future. If we do not continue to develop ...

  • Page 20
    ... products and services to address the patterns of how consumers access information and communicate on the Internet ... are increasingly using social networking sites to communicate and to acquire and disseminate information... and services, demand-side platforms and aggregators of third-party products and...

  • Page 21
    ...are not able to package and sell search advertising along with display advertising services outside of AOL Properties. As search advertising represents a significant portion of online ... condition of the capital markets or other credit markets at the time we seek financing. We currently do...

  • Page 22
    ... revenues other than subscription or advertising revenues. Currently we offer applications directly to consumers for download from AOL Properties, the Apple... our applications, content, products and services available on mobile devices, and cannot develop means of generating advertising revenues from ...

  • Page 23
    ... our technology infrastructure. The technology architectures utilized for our consumer offerings and advertising services are highly complex and may not provide ...in strategic and targeted marketing campaigns in order to inform consumers about the products and services we offer....

  • Page 24
    ...on our ability to continue offering effective products and services for advertisers and publishers. Continuing to develop and improve these products and .... Also, a substantial number of the subscribers to our subscription access service do not use the service to access the internet on a regular basis...

  • Page 25
    ...utilizes significant amounts of data about our business, consumers and our advertising and publishing partners in order to deliver our content, products and services and our advertising solutions. The misappropriation, release, loss or...

  • Page 26
    ..., consumer protection, content regulation, intellectual property, defamation, child protection, advertising to and collecting information from children, taxation, employment classification and billing. These laws and regulations and the ...

  • Page 27
    ... "cookies" and other current online advertising practices could adversely affect our business. ... advertisements and search advertisements on websites. The widespread adoption of products and technologies or changes to current products, technologies and services could adversely affect our business. ...

  • Page 28
    ... or export restrictions and changes in trade regulations; difficulties in developing, staffing and simultaneously managing a large number of foreign operations... new international regions, we may have limited experience in operating and marketing our products and services in ...

  • Page 29
    ...test goodwill for impairment at least annually, and to review our identifiable intangible assets when events or changes in circumstances indicate the carrying ...Warner via a spin-off (the "spin-off"). The historical financial information we have included in this Annual Report may not reflect what our ...

  • Page 30
    ... and the notes thereto included elsewhere in this Annual Report. Risks Relating to our Common Stock and the Securities Market Our stock price may ... of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock. ITEM 1B. None. ITEM 2. PROPERTIES ...

  • Page 31
    ... claims, suits and proceedings cannot be predicted with certainty, management does not believe that, based on current knowledge and the likely timing of resolution of ... or tort law violations that could adversely affect our business" included in our Annual Report. 27

  • Page 32
    ... table presents the quarterly high and low sales prices for the common stock on the NYSE as reported for each period indicated: High Low 2010 Quarters ... derivative transactions, or pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. ...

  • Page 33
    ...of our common stock, the S&P Midcap 400 index and the Morgan Stanley High-Technology index. ..., 2009 (the first day our common stock began "when-issued" trading on the NYSE) through December 31....87 115.69 110.55 60.23 130.71 117.10 The stock price performance included in this graph is not necessarily...

  • Page 34
    ... financial statements included elsewhere in this Annual Report. The selected consolidated financial data as of December 31, 2009, 2008 and 2007 and for the years ended December 31, ... and Analysis of Financial Condition and Results of Operations," included elsewhere in this Annual Report. Prior ...

  • Page 35
    ...government investigations. 2007 includes a net pre-tax gain of $668.2 million on the sale of the German access service business and $171.4 million in amounts incurred related to securities litigation and government investigations. (b) Includes net income (loss)...

  • Page 36
    ...to consumers, publishers and advertisers. We are focused on attracting and engaging consumers and providing valuable online advertising services. We market our offerings to advertisers on both AOL Properties and the Third Party Network under the...

  • Page 37
    ... our subscription access service, we are marketing new products and services that are either third party or AOL-developed products. We earn ... to internet consumers. We offer these products to our current and former access subscribers as well as other internet consumers. During the first quarter of ...

  • Page 38
    ... to continue to decline in the future. We continue to expand our offerings of online products and services to our subscribers and other consumers. We have... value in addition to access, such as computer tools, maintenance and warranty services, online technical support, anti-virus ...

  • Page 39
    ...Recent Developments 2012 Acquisition On February 9, 2012, AOL entered into a share-purchase agreement ... the entire goodwill of the acquired business. The step acquisition guidelines also require that AOL recognize... numbers to evaluate the reach of our total advertising network, which includes both AOL...

  • Page 40
    ... average churn represents on average the percentage of AOL-brand access subscribers that terminate or cancel our services each month, factoring in new and reactivated ... the average period of time subscribers have paid for domestic AOL-brand internet access. The average paid tenure ...

  • Page 41
    ... Advertising Revenues 60% 36 4 100% 53% 42 5 100% 54% 43 3 100% Advertising revenues are ... a user clicks on a company's advertisement or other user actions such as product/customer registrations, survey participation, sales leads or product purchases. In addition, agreements with advertisers can ...

  • Page 42
    ...-domestic Display-international Search and Contextual Total AOL Properties Third Party Network Total advertising revenues 2011 vs. ... of $70.1 million relates primarily to an increase in advertisers and publishers on the network and the acquisitions of goviral and 5Min. Domestic search and contextual ...

  • Page 43
    ...low margin search engine campaign management and lead generation affiliate products. In addition,...related to acquisitions made in 2010. Revenues Associated with Google For all periods presented in this Annual Report,... we generate revenues through paid textbased search and contextual advertising on AOL...

  • Page 44
    ... Late in the third quarter of 2011, AOL began a process to simplify the number of price plans and service packages available to AOL-brand access subscribers. As a result, we provided additional features and services to approximately 1.4 million ...

  • Page 45
    Table of Contents AOL INC. PART II-ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS... Costs of revenues General and administrative Amortization of intangible assets Amounts related to securities...: Costs of revenues General and administrative Amortization of intangible assets Amounts related to securities...

  • Page 46
    ... increase from higher variable revenue share payments to our publishing partners as a result of increased advertising revenues related to our core ... of increased sales and use taxes, increased costs of $3.8 million relating to the launch of new paid services products, and increased ad serving expense...

  • Page 47
    ...lower variable revenue share payments to our publishing partners. In addition, there were declines from a significant product distribution agreement, whereby ...being fully depreciated and declines in narrowband network and other network-related costs, partially due to terminated ...

  • Page 48
    ... from acquired intangible assets including acquired technology, customer relationships and trade names. Amortization of intangible assets decreased for the year ended December ... are available to pay those costs, and thereafter AOL has an obligation to indemnify Time Warner for such...

  • Page 49
    ... DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Goodwill Impairment Analyses Goodwill is tested annually for impairment ... that the magnitude of this stock price decline along with the weakness in the overall equity markets constituted a substantive change in circumstances in...

  • Page 50
    Table of Contents AOL INC. PART II-ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF ..., respectively, and $5.2 million of transaction costs incurred in 2009 related to the spin-off, partially offset by ... income tax provision, and non-deductible acquisition-related expenses incurred in 2011. These items...

  • Page 51
    Table of Contents AOL INC. PART II-ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND ... of certain capitalized tangible and intangible assets used in generating revenues in our business or the current or future expected cash expenditures for restructuring costs. The Adjusted ...

  • Page 52
    ...are achieved when growth from our online advertising services more than offsets the decline in domestic AOL-brand access subscribers. In order for ... implement our strategic plan and grow the earnings generated by our online advertising services, we may need to reassess our cost structure and/or seek ...

  • Page 53
    Table of Contents AOL INC. PART II-ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS expenditures and product development costs are mainly for the purchase of computer hardware, software, network equipment, furniture, fixtures ...

  • Page 54
    ...as a decrease in capital expenditures and product development costs, partially offset by an increase in cash used for acquisitions. The increase in cash... 2009 Repurchase of common stock Principal payments on capital leases Net distribution to Time Warner Tax withholdings related...

  • Page 55
    ... expenditures, product development costs and principal payments on capital leases. We consider Free Cash Flow to ... the amount of cash generated by the continuing business that, after capital expenditures, capitalized product development costs and principal payments on capital leases, can be used for ...

  • Page 56
    Table of Contents AOL INC. PART II-ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF...above, partially offset by reduced capital expenditures and product development costs. Contractual Obligations ... contractual obligations secure the future rights to various assets and services to be used in the normal ...

  • Page 57
    ... OF OPERATIONS • Purchase obligations, as used herein, refer to a purchase obligation representing an agreement to purchase goods or services that is ... include narrowband network agreements and guaranteed royalty payments. Additionally, we also purchase products and services as needed with no firm ...

  • Page 58
    ...agreed-upon contractual payment obligations. Credit risk originates from sales of advertising and subscription access service and is dispersed among many... relates primarily to our advertising customers and individual subscribers to our subscription access service, and is dispersed...

  • Page 59
    ... of whether we should report our revenue based on the gross amount billed to our advertising customers, with...million and incurred costs of revenues of $264.7 million related to providing advertising services on the Third Party Network. Impairment of Goodwill Goodwill is tested annually for impairment...

  • Page 60
    ... liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to acquire the reporting unit. If the carrying amount of the ...

  • Page 61
    ... for income taxes. Prior to the spin-off, income taxes as presented in the consolidated financial statements represented current and deferred income taxes of Time Warner attributed to us in a manner that is systematic, rational and consistent ...

  • Page 62
    ... as we focus our resources on AOL's 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 ...

  • Page 63
    ... 15, 2011, if an entity's financial statements for the most recent annual or interim period have not ... discussed in Note 3), we currently do not expect this new guidance to change the way we ... Time Warner on our behalf, to manage the risk associated with exchange rate volatility. Prior to the spin-off...

  • Page 64
    Table of Contents ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 60

  • Page 65
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of AOL Inc. We have audited the accompanying consolidated balance sheets of AOL Inc. as of December 31, 2011 and 2010, and the related consolidated statements of ...

  • Page 66
    ... revenues Costs of revenues General and administrative Amortization of intangible assets Amounts related to securities litigation and government investigations, net of recoveries Restructuring costs Goodwill ...net income (loss) per common share Shares used in computing basic income per common ...

  • Page 67
    ... except per share amounts) December 31, 2011 2010 Current assets: Cash and equivalents Accounts ...and $16.1, respectively Prepaid expenses and other current assets Deferred income taxes Total current ...236.3 Deferred revenue 70.9 92.6 Current portion of obligations under capital leases 44.6 35.2 Total ...

  • Page 68
    ... Investing Activities Investments and acquisitions, net of cash acquired Proceeds from disposal of assets and consolidated businesses, net Capital expenditures and product development costs Investment activities from discontinued operations Cash provided (used) by investing ...

  • Page 69
    ... Time Warner Distribution to Time Warner (b) Issuance of common stock (b) Reclassification of divisional equity to additional paid-in capital Amounts related to ... 0.9 $ 2,172.6 (789.8) $ (173.6) $ (b) (c) AOL completed a number of transactions with Time Warner in connection with the spin-off. The ...

  • Page 70
    ...audience. AOL's business spans online content, products and services that it offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging consumers and providing valuable online advertising services on both its owned and operated properties and third...

  • Page 71
    ... STATEMENTS services that were provided to AOL by Time Warner, including cash management and ... performance-based advertising. Search and contextual advertising revenue is generated when a user clicks on...'s screen. These text-based advertisements are either generated from a user-initiated search query ...

  • Page 72
    ...on performance. Subscription Revenues The Company earns revenue from its subscription access service in the form of monthly or annual fees paid by subscribers to its dial-up internet access service, and such revenues are recognized on a straight-line basis...

  • Page 73
    ... AOL INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Traffic Acquisition Costs AOL incurs costs through arrangements in which it acquires online advertising inventory from publishers for resale to advertisers and arrangements whereby ...

  • Page 74
    ... any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the price paid to ...-lived intangible assets (e.g., acquired technology and customer relationships), do not require that an annual impairment ...

  • Page 75
    ...certain trade name intangible assets that were abandoned in 2009. Income Taxes Subsequent to the spin-... in the consolidated financial statements using the asset and liability method prescribed by the accounting guidance ... and other current liabilities. Due to the short-term nature of these assets and ...

  • Page 76
    .... The Company's exposure to customer credit risk relates primarily to advertising customers and individual subscribers to AOL's subscription access service, and is dispersed among many different counterparties, with no single customer having a...

  • Page 77
    ...receivables consist primarily of two components, receivables from individual subscribers to AOL's subscription access service and receivables from advertising customers. Management performs separate evaluations of these components to determine ...

  • Page 78
    ... rent increases and any lease incentives. Intangible Assets AOL has a significant number of intangible assets, including acquired technology, trademarks and customer relationships. AOL ... value of internally generated intangible assets. Intangible assets acquired in business combinations are recorded ...

  • Page 79
    ... guidance generally consist of arrangements where the Company is providing online advertising as well as non-advertising elements (i.e., production of a "micro-site"). However, the Company currently does not enter into a significant number of these ...

  • Page 80
    ... Net income (loss) attributable to AOL Inc. common stockholders Shares used in computing basic ... Impairments Net Goodwill December 31, 2009 Acquisitions Dispositions Impairments Deferred tax adjustments Translation adjustments December 31, 2010 Acquisitions Deferred tax adjustments December 31, ...

  • Page 81
    ...value of the Company's sole reporting unit, the Company calculated its market capitalization based on its stock price and adjusted it by... the DCF approach provided significant additional support for management's conclusion that the control premium used to arrive at a controlling interest equity value...

  • Page 82
    ...The results of the DCF approach provided significant additional support for management's conclusion that the control premium used to arrive at a controlling interest equity value was reasonable. Based on the Company's annual impairment analysis as of December...

  • Page 83
    ... December 31, 2010 Accumulated (a) Amortization Net Acquired technology Customer relationships Trade names Other intangible assets Total (a) ...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...

  • Page 84
    ... for a purchase price of $295.5 million, net of cash acquired. The Huffington Post is an innovative internet source of online news, analysis, commentary, ... with this acquisition consist primarily of trade names to be amortized on a straight-line basis over a period of ten years and 80

  • Page 85
    ... The intangible assets related to this acquisition consist of technology acquired, customer relationships, trade names and other assets to ...The intangible assets associated with this acquisition consist of technology, advertiser relationships and a trade name to be amortized on a straight-line basis ...

  • Page 86
    ... content. On December 20, 2010, the Company completed the acquisition of About.me, Inc. ("About.me"), a company that provides a web service product that empowers people to create a single personal profile page that presents their online identities together in...

  • Page 87
    ... 31, 2011 are as follows (in millions): 2012 2013 2014 2015 Total Amount representing interest Present value of minimum lease payments Current portion Total long-term portion 83 $ 49.6 39.6 26.3 4.0 119.5 (8.7) 110.8 (44.6) 66.2 $

  • Page 88
    ...credit facility fees paid to Time Warner. The weighted-average interest rate on AOL's capital lease obligations ...December 31, 2011 2010 2009 U.S. federal: Current Deferred Foreign: Current Deferred State and local: Current Deferred Total $ 0.4 20.2 (0.4) (2.1) 5.9 5.2 29.2 84 $ 2.0 (167.7) (6.2)...

  • Page 89
    ... awards Escrow adjustments Non-deductible acquisition related costs Other Total (a) 35.0% 15.3 ... for the entire period. Prior to the spin-off, AOL was included in Time Warner's consolidated U.S. federal ... included in accrued expenses and other current liabilities on the consolidated balance sheet. 85

  • Page 90
    ..., respectively. Certain of these federal net operating loss carryforwards are subject to statutory annual use limitations. AOL had approximately $1,018.0 million and ... 31, 2011 2010 2009 Beginning balance Additions for current year tax positions Reductions for prior year tax ...

  • Page 91
    ... post spin-off rights, responsibilities and obligations of Time Warner and AOL ..., combined, unitary or similar group with Time Warner. As a result, at the date of the spin-off, AOL ...2003 through the current period remain open to examination by the taxing authorities. For the periods following the spin...

  • Page 92
    ... and will be made in accordance with applicable securities laws in the open market or in private transactions and ..., or pursuant to any trading plan adopted in accordance with Rule 10b5-1 of the Securities and Exchange... estimated amount payable to Time Warner for income taxes prior to the spin-off and...

  • Page 93
    ...and nonemployee directors of AOL with exercise prices equal to the quoted market value of the common stock ..., at the discretion of the Board of Directors, if paid by the Company during the period of time that the restricted stock ... options vested ratably over a four-year vesting period and expired 10 ...

  • Page 94
    ... the shares subject to outstanding The Huffington Post stock options were cashed out pursuant to the merger agreement (all of the cashed-out shares were ... date. See "Note 4" for additional information on the acquisition of The Huffington Post and related stock conversion. Equity-Based ...

  • Page 95
    ...exercise experience of AOL employees that held similar options to acquire Time Warner common stock. The risk-free rate assumed in ... that were converted into AOL stock options. Represents Huffington Post options converted at the time of acquisition. As of December 31, 2011, 4.7 million shares of AOL ...

  • Page 96
    ....81 22.74 21.47 Represents the Time Warner RSUs held by AOL's Chairman and Chief Executive Officer that were converted into ...presented in the table below represent the weighted-average value of the applicable assumption used to value Time Warner stock options at their grant date. Year Ended December...

  • Page 97
    ... related to organizational changes made in an effort to improve its ability to execute its strategy. These restructuring costs related to the Company's acquisition of The Huffington Post, a reassessment of its operations in India and actions in the United ...

  • Page 98
    ... of $12.7 million, $11.6 million was classified as a current liability within accrued expenses and other current liabilities, with the remaining $1.1 million classified as a long-term liability in the consolidated balance ... has long-term non-cancelable lease commitments for office space and operating...

  • Page 99
    ..., see "Note 12" for additional information. Contingencies On April 30, 2008, Bascom Global Internet Services, Inc. filed claims against ..., suits and proceedings cannot be predicted with certainty, management does not believe that, based on current knowledge and the likely timing of resolution of the ...

  • Page 100
    ...liabilities Rent and facilities expense Network and related costs Member support services Other accrued expenses Total accrued expenses and ... news, information and community platform business dedicated to providing comprehensive local information and services for individual ...

  • Page 101
    ...and obligations of Time Warner and AOL after the spin-off with respect to all tax matters. See "Note 6" ... and incur expenses and that has discrete financial information that is regularly reviewed by the chief operating decision maker in deciding how to allocate resources and in assessing performance....

  • Page 102
    ... (b) Operating income (loss) Net income (loss) attributable to AOL Inc. Basic net income (loss) per common share ... ended March 31, 2011 includes restructuring costs of $27.8 million mainly as a result of our acquisition of The Huffington Post and costs incurred as a result of the reassessment of our ...

  • Page 103
    Table of Contents AOL Inc. SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 2009, 2010 and 2011 (In millions) Balance at Beginning of Year Additions Charged to Costs and Expenses Allowance for Doubtful Accounts Deductions Balance at End of Year ...

  • Page 104
    Table of Contents ITEM 9. None. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 100

  • Page 105
    ... and forms, and that such information is accumulated and communicated to senior management, as appropriate, to allow timely decisions regarding required disclosure. ... of, our Chief Executive Officer and Chief Financial Officer and effected by the Board of Directors, management and other personnel to ...

  • Page 106
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and Shareholders of AOL Inc. We have audited AOL Inc.'s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control- Integrated ...

  • Page 107
    Table of Contents ITEM 9B. None. OTHER INFORMATION 103

  • Page 108
    ...addition to the information set forth under the caption "Executive Officers of the Registrant" in Part I, Item 1 of this Annual Report, the information ...be filed in connection with the 2012 Annual Meeting of Stockholders. ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES The information called for by ...

  • Page 109
    Table of Contents AOL Inc. PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT ... Financial Statements and Supplementary Data, filed as part of this Annual Report. (a)(2) Financial Statement Schedule ..., filed as part of this Annual Report. All other schedules are omitted as the required information is not ...

  • Page 110
    ... and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the ... requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons ... and Chief Accounting Officer (Principal Accounting Officer) Director Director Director 106 ...

  • Page 111
    Table of Contents AOL INC. SIGNATURES Signature Title Date /s/ /s/ /s/ PATRICIA E. MITCHELL Patricia E. Mitchell Director Director Director 107 February 24, 2012 February 24, 2012 February 24, 2012 FREDRIC G. REYNOLDS Fredric G. Reynolds JAMES R. STENGEL James R. Stengel

  • Page 112
    ... to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated December 11, 2009). Transition Services Agreement between AOL Inc. and Time Warner Inc., dated...Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.5 to the Registrant's Current Report on ...

  • Page 113
    ...Exhibit 10.4 to the Registrant's Current Report on Form 8-K dated December 22, 2009).** Employment Agreement among AOL LLC, Time Warner Inc.... by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K dated December 22, 2009).** Employment Agreement between AOL LLC and Arthur Minson,...

  • Page 114
    ...36 10.37 10.38 10.39 2009 Retention Program Letter Agreement between AOL LLC and Julie Jacobs, dated April 1, 2009 (incorporated ....28 to the Registrant's Form 10-K dated February 25, 2011).** Amended and Restated Interactive Marketing Agreement between AOL LLC and Google Inc., dated October 1, 2003 ...

  • Page 115
    Table of Contents AOL INC. EXHIBIT INDEX Exhibit Number Description 10.40 10....6, 2009).* Fifteenth Amendment to the IMA, dated March 2, 2007 (incorporated herein by reference to Exhibit 10.38... Sixteenth Amendment to the IMA, dated September 24, 2007 (incorporated herein by reference to Exhibit 10.39...

  • Page 116
    ... Thirty-Second Amendment to IMA, dated December 21, 2011 and effective December 1, 2011.* Network Services Agreement between AOL LLC and MCI Communications Services, Inc., a subsidiary of Verizon Communications Inc., dated January 1, 2004 (the ...

  • Page 117
    ...Consolidated Financial Statements. †† Portions of this agreement have been omitted pursuant to a request for confidential treatment. Management contract or compensatory ... any registration statement or other document filed under the Securities Act of 1933, as amended, except as expressly set forth...

  • Page 118
    ....00 semi-monthly, less applicable withholdings, which is $600,000.00 on an annual basis ("Base Salary"). Executive's Base Salary will be reviewed annually during the Employment Term and may be increased based on Executive's individual performance or increases in competitive ...

  • Page 119
    [Signature page to Amendment follows] 2

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    IN WITNESS WHEREOF, the parties hereto have duly executed this Amendment as of the day and year first written above. AOL Inc. /s/ Sandy Mott Sandy Mott Vice President, Human Resources /s/ Julie Jacobs Julie Jacobs Executive Vice President and General Counsel 3

  • Page 121
    ... AMENDMENT NUMBER 32 TO AMENDED AND RESTATED INTERACTIVE MARKETING AGREEMENT This Amendment Number 32 to Amended and Restated Interactive ... her [****] and has [****] that [****] in such [****] or (z) the end user has [****] on the [****] page at [****]. AOL may use [****] Queries [****] set forth in ...

  • Page 122
    ... AOL INC. By: Name: Title: Date: GOOGLE INC. /s/ Nikesh Arora By: Nikesh Arora Name: President, Global Sales and Business Development Title: Date: 2011.12.21 16:30:03 -08'00' /s/ Francis Lobo Francis Lobo SVP: AOL Search 12/21/2011 2

  • Page 123
    Exhibit 1 of Amendment 32 A Complete Set of Representative Screenshots of each 19 pages] 3

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    ... LIMITED Goviral S.à r.l. Goviral S.r.l. Goviral B.V. AOL Fulfillment Services LLC AOL International Finance Limited AOL Online India Private Limited AOL Ventures I, LLC CompuServe Interactive Services, Inc. Goviral LLC MapQuest, Inc. Netscape ...

  • Page 125
    AOL Global Operations Limited AOL Online Japan, Ltd. Nullsoft, Inc. Outside.in Inc. Patch Media ...Totekasche Holdings, Inc. d/b/a Userplane Yedda, Inc. Yedda Technologies-Knowledge Management Services (Y.O.D.E.A. 2006) Ltd. Ireland Japan Arizona Delaware Delaware Delaware California Delaware Delaware...

  • Page 126
    ... the consolidated financial statements and schedule of AOL Inc. and the effectiveness of internal control over financial reporting of AOL Inc. included in this Annual Report (Form 10-K) of AOL Inc. for the year ended December 31, 2011. /s/ Ernst & Young ...

  • Page 127
    Exhibit 31.1 CERTIFICATIONS I, Timothy M. Armstrong, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of AOL Inc.; Based on my knowledge, this report does not contain any untrue ...

  • Page 128
    Exhibit 31.2 CERTIFICATIONS I, Arthur Minson, certify that: 1. 2. 3. 4. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2011 of AOL Inc.; Based on my knowledge, this report does not contain any untrue ...

  • Page 129
    .... ("the Company"), as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned officers of the Company ... requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and The information contained in the Report fairly presents, in ...

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