America Online 2013 Annual Report

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Table of Contents





x



¨





 





 
 


 






 x¨
 ¨x


x¨


x¨


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Table of contents

  • Page 1
    ... registrant has submitted electronicallc and posted on its corporate Web site, if anc, everc ... (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x The aggregate market value ... on June 30, 2013) was approximatelc $2.7 billion. As of Februarc 14, 2014, the number of shares of the Registrant's ...

  • Page 2

  • Page 3
    ... and Financial Disclosure Controls and Procedures Other Information Directors, Executive Officers and Corporate Governance Executive Compensation Securitc Ownership ... Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services 60 61 ...

  • Page 4
    ... Statements of Comprehensive Income (Loss) for the cears ended December 31, 2013, 2012 and 2011 ... 2011 Consolidated Statements of Equitc for the cears ended December 31, 2013, 2012 and 2011 Note ... Note 4: Business Acquisitions, Dispositions and Other Significant Transactions Note 5: Long-term Debt ...

  • Page 5
    ...," "projects," "forecasts," "intends," "plans," "will," "believes" and words and terms of similar substance used in connection with anc discussion of future operating or ...." In addition, we operate a web services companc in a highlc competitive, rapidlc changing and consumer- and ...

  • Page 6
    ... Inc. ("Time Warner") in 2001. In the fourth quarter of 2009, the board of directors of Time Warner approved the complete legal and structural separation of the Companc from Time Warner (.... The Brand Group also includes co-branded websites owned or operated bc third parties for which ...

  • Page 7
    ... products and services, bc utilizing highlc scalable publishing platforms and content management ... through sites such as AOL.com and The Huffington Post, and related applications, as well as... we utilize publishing platforms and content management scstems that are designed to scale in a cost-effective ...

  • Page 8
    ... placed on sites targeted bc advertisers based on the content of the websites. We also market our search services through search engine marketing, working with marketing partners to drive traffic to, and maximize the utilization of, our search services. While the majoritc ...

  • Page 9
    ... market additional new products, services and bundles. AOL subscribers are able to manage their subscriptions through an online self-service portal as well .... We also offer free communications tools, such as AOL Mail, which is a leading e-mail service in the United States. AOL ...

  • Page 10
    ...in combination with one another on a managed-service basis: AOP AOP is our global demand side platform that utilizes AdLearn,...option to use AOP through self-service or managed services solutions. Advertising.com (Ad.com) Advertising.com is our global third-partc advertising network that, similar to...

  • Page 11
    ...or as a part of the ADTECH ad serving platform. Marketplace is also available as a self-service tool or managed-service solution. ADTECH ADTECH is... Our video technologc platform is designed to meet a varietc of video-related needs of our customers and partners including those related...

  • Page 12
    ...all devices. Advertisers and publishers use the Pictela platform globallc on a self-service or managed ...Third Partc Network and offer advertising services to the publishers of these sites. We market ... dedicated advertising sales force. A significant area of our focus is on offering customized premium ...

  • Page 13
    ...for AOL Properties, based on our agreement that runs through December 31, 2015. In connection with these search services, Google provides us with a share of the revenue generated through paid text-based search advertising and contextual advertising ...

  • Page 14
    ...The revenue and cash flow generated from our subscription services will help us to pursue our strategic initiatives. The revenue related to our other bundled ...new and enhanced versions of our products and services for our consumers, advertisers, publishers and subscribers. While in...

  • Page 15
    ...which are increasinglc offering their own internet products and services. The AOL Networks technologc platform competes with other end-to-end platform ... Inc. and Turn Inc. that aim to service automation needs for advertisers and publishers. AOL Networks also competes with companies...

  • Page 16
    ... and international governmental authorities continue to evaluate the privacc implications inherent in the use of mobile platforms, advertising networks and third-partc web "cookies" for behavioral advertising. We use cookies, which are small ...

  • Page 17
    ...those described in "Item 1A-Risk Factors-Risks Relating to Our Business-We face risks relating ...our business ." For geographic area data for the cears ended December 31, 2013, 2012 and 2011, ..., we have historicallc seen a sequential increase in advertising revenues across our segments associated with ...

  • Page 18
    ... cou mac automaticallc receive e-mail alerts and other information about AOL bc visiting the... Mr. Armstrong joined Google Inc. in 2000 as Vice President, Advertising Sales, and in 2004 ... serves on the board of directors of priceline.com Incorporated and on the board of advisors of Action America, Inc....

  • Page 19
    ... of directors of Gartner Inc. She previouslc served on the AOL Board of Directors from 2009 until September 2012 and on the board of directors of Crane Co. from 2004 ... worked for News Corporation Ltd. and K-111 Communications. Ms. Lcne currentlc serves on the board of directors of Starz, ...

  • Page 20
    ... of The Rockefeller Universitc and The New School. Ms. Lcne previouslc served on the AOL Board of Directors from 2009 until March 1, 2013 and on the board of directors of CIT Group Inc. from 2006 until 2009. Mr. Bud Rosenthal Mr. Rosenthal, age 47, ...

  • Page 21
    ... effective products and services for advertisers and publishers. As the advertising market generates and ... additional costs to implement more effective products and services. As programmatic advertising gains ... programmatic platforms. Continuing to develop and improve these products and services mac ...

  • Page 22
    ... and services or in attracting and retaining consumers, advertisers, publishers and subscribers domesticallc ... on a third-party search provider. We do not own or control a general web ... unilaterallc make in the future to its search service or advertising network, including changes in its policies and ...

  • Page 23
    ... our advertising revenues. Because we do not own or control such a search service, we...to package, sell or scndicate search advertising along with displac advertising services outside of AOL Properties and ... large part upon the continued service of kec members of our management team and other personnel...

  • Page 24
    ..., the fact that a significant amount of online content, products and services has been optimized for use with broadband internet connections and the effects of our strategic shift to focus on generating advertising revenues, which resulted in us essentiallc...

  • Page 25
    ... on the availabilitc of network and information scstems, the internet and other technologies. Shutdowns or service... changes in our methods of doing business and/or our content, products and services... or reduce the number of our offerings to consumers, advertisers, publishers and AOL subscribers, could...

  • Page 26
    .... Our operations utilize significant amounts of data about our business, consumers, AOL subscribers and our advertising and publishing partners in order to deliver our content, products and services and our advertising solutions. Although we take ...

  • Page 27
    ... with our posted privacc policies or with anc data-related consent orders, Federal Trade ... authentication, preference management, research and measurement, personalization, targeting and advertisement and... our organizational structure and costs with our strategc. In connection with such activities, we...

  • Page 28
    .... Since Januarc 1, 2013, we acquired companies such as Adap.tv and Gravitc and we mac make additional acquisitions and ...; and the potential impairment of relationships with consumers, partners and emplocees as a result of the combination of acquired operations and new management personnel. We face ...

  • Page 29
    Table of Contents the requirements of local laws and customs relating to the publication and distribution of content and the displac and sale of advertising; uncertain protection and enforcement of our investment or intellectual propertc ...

  • Page 30
    Table of Contents in connection with capital gains that mac be generated from a potential asset sale. Our abilitc to use the tax assets...shareholder value and preserve our abilitc to use the tax assets, our Board of Directors (the "Board") adopted a Tax Asset Protection Plan (the "TAPP") to act as a ...

  • Page 31
    ... square feet. We lease or own additional office, data center and warehouse space located in California and Virginia totaling... thousand square feet in over 50 facilities for use as corporate offices, sales offices, development centers, data centers and other operations in other locations in the United...

  • Page 32
    ... program during the three months ended December 31, 2013: Total Number of Shares Purghased as Part of Publigly announged Plans or Programs (a) (b)... repurchases mac be made in accordance with applicable securities laws in the open market, in block trades, pursuant to pre-arranged ...

  • Page 33
    ... in the tables above excludes commissions and other fees paid in relation to purchases through December 31, 2013. Dividend Poligy On August 26, ... of a special, one-time, cash dividend of $5.15 per share to shareholders of record at the close of business on December 5, ...

  • Page 34
    .... ITEM 6. SELECTED FINTNCITL DTTT The following financial information for each of the five cears ended December 31, 2013 has been derived from ...of the spin-off, we were a subsidiarc of Time Warner. Our historical financial information included herein mac not necessarilc ...

  • Page 35
    ... impairment charge of $17.5 million related to Patch. 2012 includes the sale of approximatelc 800 of our patents and their related patent applications (the "Sold Patents") to Microsoft, and the grant to Microsoft of a non-exclusive license to ...

  • Page 36
    ...2011 2010 2009 Balange Sheet Data: Cash and equivalents Goodwill Total assets Long-term portion of obligations under capital leases Treasurc stock, at cost Total equitc $ $ $ $ $ $ 207.3 1,361.7 2,983.4 56.2 (942.9) 2,267.5 ...

  • Page 37
    ...and a suite of digital brands, products and services that we offer to consumers, advertisers, publishers and subscribers. We are focused on ... partc publishers with premium products and services intended to make their websites attractive to brand advertisers, such as video and ...

  • Page 38
    ... the performance of our advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch and ... advertisers with inventorc purchased from third-partc publishers through AOL Networks. Amounts received from external customers for inventorc sold through AOL ...

  • Page 39
    ... as our demand side and supplc side platforms, in order for advertisers and agencies to better manage their advertising campaigns through ... buc and sell video advertising inventorc both programmaticallc and on a managed-services basis across desktop, mobile and internet-enabled televisions. Through ...

  • Page 40
    ...$41.3 million for the cear ended December 31, 2013. The 2013 restructuring costs primarilc related to our efforts to align our organizational ...operating results include: Growth of advertising revenues, net of traffic acquisition costs; Unique visitors to AOL Properties; Moderation ...

  • Page 41
    ...unique visitor numbers also include unique visitors attributable to co-branded websites owned... attributable to co-branded websites owned bc third parties where the internet traffic was assigned...-on to the AOL access service. Our subscriber numbers include subscribers participating in introductorc free...

  • Page 42
    ...revenues for the periods presented: Years Ended Degember 31, 2013 2012 2011 Revenues: Advertising 70% Subscription Other ... or other revenue sharing relationships. In addition, agreements with advertisers can include other advertising-related services such as content sponsorships, exclusivities ...

  • Page 43
    ... Third Partc Network revenue of $87.9 million relates in part to an increase in publishers on the network and increased sales of premium packages and products,... paid text-based search and contextual advertising on AOL Properties provided bc Google. For the cears ended December 31, 2013, 2012 and 2011...

  • Page 44
    ... to price increases related to our value plan strategc that provides additional features and services to subscribers. Subscription revenues declined 12% ... generated from publishers and advertisers using Adap.tv's platform technologc and features, as well as services such as ad serving and hosting. ...

  • Page 45
    ... costs incurred through arrangements in which we acquire third-partc online advertising inventorc for resale and arrangements wherebc partners distribute our free products or services or otherwise direct traffic to AOL Properties. TAC arrangements have a ...

  • Page 46
    ... Third Partc Network advertising revenues, including video, and increases related to our search marketing initiatives. ... of certain network equipment, which is due in part to the decline in the number of domestic AOL subscribers. Costs of revenues also included a decline in non-network depreciation ...

  • Page 47
    ... a prior acquisition. Additionallc, general and administrative expenses decreased due to a decline in marketing related ... were increases of $5.5 million in marketing costs, $10.7 million of expenses related to the proxc contest and $16.5 million of expenses related to the patent sale and license and ...

  • Page 48
    ... restructuring costs primarilc related to costs incurred as a result of our acquisition of The Huffington Post.... presented (in millions): Year Ended Degember 31, % Change from 2011 2013 2012 to 2012... for the cear ended December 31, 2012 includes the gain on the sale of the Sold Patents to Microsoft ...

  • Page 49
    ... statement amounts for the periods presented (in millions): Years Ended Degember 31, % Change from 2011 2013 2012 to 2012 % Change from 2010 2011 ... losses, for which no benefit is received on our U.S. income tax provision, and non-deductible acquisition-related expenses incurred in 2011. These ...

  • Page 50
    ... 31, 2012 include patent licensing income of $96.0 million and costs related to the patent sale and license of $15.7 million, as well as ..., $7.6 million of tax settlement expenses and acquisition-related costs of $5.1 million. Adjusted OIBDA increased for the cear ended December 31, 2013 as compared ...

  • Page 51
    ... 31, 2013, 2012 and 2011: Years Ended Degember 31, 2013 2012 % Change from 2012 to 2013..., primarilc at Patch, and declines in marketing and consulting related costs as a result of our continued cost ..., partiallc offset bc an increase in TAC as a result of our marketing-related efforts on search. 47

  • Page 52
    ...due to price increases related to our value plan strategc that provides additional features and services to subscribers. Adjusted OIBDA for the ..., which is due in part to the decline in the number of domestic AOL subscribers. AOL Networks 2013 vs. 2012 AOL Networks revenue increased primarilc due to...

  • Page 53
    ...OF OPERTTIONS million related to Adap.tv, which was acquired in September 2013. The increase in AOL Networks ... bc an increase in publishers and advertisers utilizing AOL Networks and increased sales of premium ... growth in inventorc from AOL owned and operated sites sold through AOL Networks. Adjusted ...

  • Page 54
    ... our domestic working capital needs. Summary Cash Flow Information Our cash ... received from the disposal of assets. Capital expenditures and product development costs are mainlc for the purchase ... related to net share settlements of restricted stock units, proceeds from the exercise of stock options ...

  • Page 55
    ...pacments made in 2012 related to prior cear acquisitions and a decrease due to the timing of changes in working capital. Investing Activities The...2012, a decrease in capital expenditures and product development costs and acquisition pacments related to The Huffington Post and goviral ApS ("goviral",...

  • Page 56
    ... pacments on capital leases Tax withholdings related to net share settlements of restricted stock units ... development costs and principal pacments on capital leases. We consider Free Cash ... information to management and investors about the amount of cash generated bc the business that, after capital ...

  • Page 57
    ... and product development costs Less: Principal pacments on capital leases Free Cash Flow $... Cash Flow Information-Operating Activities" above. Free Cash Flow increased for the cear ended ... future rights to various assets and services to be used in the normal course of operations. For example, we are...

  • Page 58
    ...; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We expect to receive consideration ( i.e., products or services) for these purchase obligations. The purchase obligation amounts do not represent the entire ...

  • Page 59
    ... result of claims made in connection with indemnifications provided and, as of December 31, 2013, management concluded .... Credit risk originates from sales of advertising and subscription service and is dispersed among ..., we track customer exposure based on news reports, rating agencc information and ...

  • Page 60
    ... our advertising offerings on the Third Partc Network, which consist of sales of displac, video and search advertising. In connection with our ...of $393.8 million related to providing advertising services on the Third Partc Network. Impairment of Goodwill Goodwill is tested annuallc for ...

  • Page 61
    ...reviewed bc segment management. Different judgments relating to the determination of reporting units could significantlc affect the testing of goodwill ...consolidated business determined based on market-capitalization approach. Based on the goodwill impairment tests performed at December 1, 2013, the ...

  • Page 62
    ... resources on our 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 devices, including on portable wireless ...

  • Page 63
    ... Impacting Future Periods Accounting for Cumulative Translation Adjustments In March 2013, new guidance was issued related to accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or groups of assets within...

  • Page 64
    ...Market risk is the potential gain or loss arising from changes in market rates and prices, which ...2013, while the majoritc of our cash and accounts receivable balances were denominated in U.S. dollars... approximatelc 19% of total cash and accounts receivable, including 6% in Euros, 6% in British pounds...

  • Page 65
    Table of Contents ITEM 8. FINTNCITL STTTEMENTS TND SUPPLEMENTTRY DTTT 61

  • Page 66
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC TCCOUNTING FIRM The Board of Directors and Shareholders of AOL Inc. We have audited the accompancing...of the Public Companc Accounting Oversight Board (United States). Those standards require that we plan and perform ...

  • Page 67
    .... CONSOLIDTTED STTTEMENTS OF COMPREHENSIVE INCOME (LOSS) (In millions, exgept per share amounts) Years Ended Degember 31, 2013 2012 2011 Revenues: Advertising Subscription Other Total revenues Costs of revenues General and administrative ...

  • Page 68
    ...: Cash and equivalents Accounts receivable, net of allowances of $8.3 and $6.6, respectivelc Prepaid expenses and other ...Long-term portion of obligations under capital leases Long-term deferred income taxes Other long... deficit Treasurc stock, at cost, 34.9 million shares at December 31, 2013 and 33.5 ...

  • Page 69
    ... adjustments Changes in operating assets and liabilities, net of acquisitions Receivables Accrued expenses ... and acquisitions, net of cash acquired Proceeds from disposal of assets, net Capital expenditures ... on capital leases Tax withholdings related to net share settlements of restricted stock units...

  • Page 70
    ...) Treasury Tggumulated Defigit Stogs, NonControlling Interest Capital $ 3,376.6 $ Comprehensive income Amounts related to equitc-based compensation, net ... income (loss) Contributions from noncontrolling interest owners Amounts related to equitc-based compensation, net of tax withholdings (see ...

  • Page 71
    ... audience and a suite of digital brands, products and services that it offers to consumers, advertisers, publishers and subscribers. AOL is focused on attracting...and MapQuest. The Brand Group also includes co-branded websites owned or operated bc third parties for which certain ...

  • Page 72
    ... interest in a joint venture between Mitsui & Companc Ltd. ("Mitsui") and AOL ("Ad.... 100% of the results of Ad.com Japan for the cears ended December 31, 2013 and 2012 ... The Companc generates revenue primarilc from advertising and from its subscription services. Revenue is recognized when persuasive ...

  • Page 73
    ... Partc Network, which consist primarilc of the sale of displac advertising and also include search advertising. Advertising arrangements for the sale of Third Partc Network inventorc ...as product/customer registrations, survec participation, sales leads, product purchases or other revenue sharing ...

  • Page 74
    ... AOL incurs costs through arrangements in which it acquires online advertising inventorc from publishers for resale to advertisers and arrangements wherebc partners distribute AOL's free products or services or otherwise direct traffic to AOL ...

  • Page 75
    ...disposal activities, including the related one-time and ongoing involuntarc termination benefits, are reflected as restructuring costs in the ... equitc-based compensation, which requires that a companc measure the cost of emplocee services received in exchange for an award of equitc instruments based ...

  • Page 76
    ...assets ( e.g., acquired technologc and customer relationships), do not require that an annual impairment test ... for the difference. AOL recorded non-cash asset impairments and write-offs related ...recorded in 2012 and 2011 related primarilc to asset write-offs in connection with facilitc consolidation...

  • Page 77
    ... credit risk relates primarilc to advertising customers and individual subscribers to AOL's subscription services, and is dispersed among manc different counterparties,... paid text-based search advertising on AOL Properties. For the cears ended December 31, 2013, 2012 and 2011,...

  • Page 78
    ... Accounts AOL's receivables consist primarilc of two components, receivables from individual subscribers to AOL's subscription services and receivables from advertising customers. Management performs separate evaluations of these components to ...

  • Page 79
    ... of personnel and related costs that are incurred related to the development of software and user-facing internet offerings that ... Costs The Companc expenses advertising costs as thec are incurred. Advertising expense was $61.6 million, $85.8 million and $76.9 million for the cears ended December 31,...

  • Page 80
    ...attributable to AOL common stockholders per common share (in millions, except per share amounts): Years Ended Degember 31, 2013 2012 2011 Net income attributable to AOL Inc. common stockholders Shares used in computing basic income per...

  • Page 81
    ...TO THE CONSOLIDTTED FINTNCITL STTTEMENTS NOTE 3-GOODWILL TND INTTNGIBLE TSSETS A summarc of changes in the Companc's goodwill during the cears ended December 31, 2013 and 2012 is as follows (in millions): Degember 31, Translation adjustments...

  • Page 82
    ... ("Adap.tv") during the third quarter of 2013. See "Note 4" for additional information on this acquisition. Impairment Testing of Goodwill As discussed in ...fullc impairing the goodwill related to Patch. The Companc performed its annual goodwill impairment test for the Brand Group, AOL Networks and ...

  • Page 83
    ...(a) Degember 31, 2012 Tggumulated Tmortization (a) Gross Net Gross Net Acquired technologc Customer relationships Trade names Other intangible assets Total... of December 31, 2013, the estimated amortization expense for each of the succeeding five cears ending December 31 is...

  • Page 84
    ... obtained control of the board and of the dac-to-dac operations of Ad.com Japan. AOL accounted for the incremental 3% share purchase as a business combination achieved in stages ("step acquisition") and consolidated Ad.com Japan beginning on the closing ...

  • Page 85
    ... which uses machine learning technologc to allow for real time optimization of advertising campaigns. The aggregate purchase price of these acquisitions was $27.8 million, net of cash acquired. AOL recorded $12.5 million of goodwill, of which $6.6...

  • Page 86
    ... $295.5 million, net of cash acquired. The Huffington Post is an innovative internet source of online news, analcsis, commentarc, entertainment and communitc engagement. ... Plan options held bc The Huffington Post emplocees that were converted into unvested AOL stock options was $12.1...

  • Page 87
    ... earlc stages of development. This fact, along with market conditions at the time of acquisition, contributed to purchase prices that resulted in the...growth and diversification of the customer base. In connection with incentive cash compensation arrangements made in connection with acquisitions, the...

  • Page 88
    ... Portfolio Sale and License On June 15, 2012, the Companc sold approximatelc 800 patents and their related patent applications (the "Sold Patents") to Microsoft Corporation ("Microsoft"), and granted Microsoft a non-exclusive license to the Companc's ...

  • Page 89
    .... Future minimum capital lease pacments at December 31, 2013 are as follows (in millions): 2014 2015 2016 2017... (iii) one-month LIBOR plus 1.0 percent. The applicable margin relating to anc Eurodollar loan is 2.0% and the applicable margin relating to anc ABR loan is 1.0%. AOL is required to pac a ...

  • Page 90
    ... before income taxes were as follows (in millions): Years Ended Degember 31, 2013 2012 2011 Domestic Foreign Total $... provision for income tax expense provided on income from continuing operations were as follows (in millions): Years Ended Degember 31, 2013 2012 2011 U.S. federal: Current ...

  • Page 91
    ... provision for income taxes were as follows: Years Ended Degember 31, 2013 2012 2011 U.S. federal statutorc rate State... assets Worthless stock deduction Shortfall on emplocee equitc awards Escrow adjustments Non-deductible acquisition related costs Federal research credit, net of unrecognized tax...

  • Page 92
    ... million of U.S. federal and foreign capital loss carrcforwards as of December 31, 2013 and 2012 ... net operating loss carrcforwards, $499.9 million related to capital loss carrcforwards and $49.2... increase in valuation allowance from 2012 to 2013, $61.3 million is related to additional foreign losses,...

  • Page 93
    ... Matters Agreement with Time Warner Inc. ("Time Warner"), effective December 9, 2009, that governs the respective post spin-off rights, responsibilities and obligations of Time Warner and AOL ...2010 through 2013. The Companc is currentlc under examination bc the Internal Revenue Service (IRS...

  • Page 94
    ... the Certificate of Designation. Rights and privileges associated with shares of Preferred Stock are subject to authorization bc the Companc's Board of Directors (the "Board") and mac differ from those of anc and all other series at anc time outstanding. All shares of ...

  • Page 95
    ..., including both net operating loss deferred tax assets and capital loss carrc forward deferred tax assets. Unless otherwise restricted,...to offset future U.S. taxable income, including in connection with capital gains that mac be generated from a potential asset sale. Should a "change of control" be ...

  • Page 96
    ... in cash as the respective RSUs and PSUs vest. The Companc did not record anc incremental compensation expense in connection with the adjustment of stock options or pacment of dividend equivalents on RSUs and PSUs given that the adjustments were made ...

  • Page 97
    ... from authorized but unissued shares or from treasurc stock. AOL Employee Stock Purchase Plan Pursuant to the... issuance pursuant to the ESPP as of December 31, 2013. Acquisition of Adap.tv In connection with the acquisition of Adap.tv, the Companc replaced unvested in-the-monec options held bc Adap...

  • Page 98
    ... on the acquisition of Adap.tv and related stock conversion. Acquisition of The Huffington Post In connection ... on the acquisition of The Huffington Post and related stock conversion. Equity-Based Compensation Expense ... (in millions): Years Ended Degember 31, 2013 2012 2011 Stock options RSUs ...

  • Page 99
    ... $ $ 161,134 46,631 114,065 Represents The Huffington Post options converted at the time of acquisition. Represents a one-time equitable adjustment... grants of stock options. As of December 31, 2013, there was $18.0 million of unrecognized compensation cost related to outstanding emplocee...

  • Page 100
    ...restructuring costs were primarilc related to involuntarc emplocee terminations. 2011 Restrugturing Costs In connection with the Companc's restructuring...to execute its strategc. These restructuring costs related to the Companc's acquisition of The Huffington Post, a reassessment of its operations in...

  • Page 101
    ...31, 2013, 2012 and 2011, respectivelc. The Companc has long-term lease commitments for office space in various locations around the world, a number of which have renewal options at market rates to be determined prior to the renewal option being ...

  • Page 102
    ... TAC) Taxes General and administrative costs Restructuring liabilities Rent and facilities expense Network and related costs Member support services Other accrued expenses Total accrued expenses and other liabilities $ 80.7 35.3...

  • Page 103
    ... and certain service brands. The results for this segment reflect the performance of AOL's advertising offerings on a number of owned and operated sites, such as AOL.com, The Huffington Post, TechCrunch ... The Brand Group also includes co-branded websites owned or operated bc third parties for ...

  • Page 104
    ... asset impairments and write-offs and special items, which management does not ...and allocations of shared corporate and technologc costs which are determined to be directlc related to a particular ...TOL Networss Corporate and Other Consolidated Total 2013 Revenues from external customers Advertising...

  • Page 105
    ...contest of $8.9 million, expense relating to the Virginia sales tax settlement of $7.6 million and acquisition-related costs of $5.1 million. Special items for the cear ended December 31, 2011 include acquisition-related costs of $12.0 million and $8.5 million of...

  • Page 106
    ...30, Degember 31, 2013 Revenues: Advertising Subscription Other Total revenues Costs of revenues ...disposition of the Sold Patents and income of $96.0 million from licensing of intellectual propertc both related ... not equal its annual earnings per share due to timing impacts of the patent transaction...

  • Page 107
    Table of Contents ITEM 9. None. CHTNGES IN TND DISTGREEMENTS WITH TCCOUNTTNTS ON TCCOUNTING TND FINTNCITL DISCLOSURE 103

  • Page 108
    ... bc, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected bc the Board, management and other personnel to provide reasonable assurance regarding the reliabilitc of our financial reporting and the ...

  • Page 109
    Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC TCCOUNTING FIRM The Board of Directors and Shareholders of AOL Inc. We have audited AOL Inc.'s ... of the Public Companc Accounting Oversight Board (United States). Those standards require that we plan and perform the ...

  • Page 110
    Table of Contents ITEM 9B. None. OTHER INFORMTTION 106

  • Page 111
    ...III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS TND CORPORTTE GOVERNTNCE The information required bc ... SEC rules will also be disclosed on our website. ITEM 11. EXECUTIVE COMPENSTTION The information ... Annual Meeting of Stockholders. ITEM 14. PRINCIPTL TCCOUNTING FEES TND SERVICES The information ...

  • Page 112
    ...All financial statement schedules are omitted as the required information is not applicable or the information is presented in the consolidated financial statements ... intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents ...

  • Page 113
    ... Karen Dysstra Chief Financial and Administrative Officer (Principal Financial Officer) Controller and Chief Accounting Officer (Principal Accounting Officer) Director Februarc 19, 2014 /s/ Matthew Kelpc Matthew Kelpy Februarc 19, 2014 /s/ Eve...

  • Page 114
    ... Date /s/ Hugh F. Johnston Hugh F. Johnston Director Februarc 19, 2014 Februarc 19, ... 19, 2014 /s/ Dawn G. Lepore Dawn G. Lepore Director /s/ Patricia E. Mitchell Patrigia E. Mitghell ... /s/ Fredric G. Recnolds Fredrig G. Reynolds Director /s/ James R. Stengel James R. Stengel Director 110

  • Page 115
    ... of August 5, 2013. 8-K 2.1 9/6/13 2.4 Agreement and Plan of Merger Bc and Among AOL Inc., Headline Acquisition Corporation, TheHuffingtonPost.com, Inc. and Shareholder Representative Services LLC, as the Securitc Holders' Agent dated as of ...

  • Page 116
    .../22/09 Form of Non-Qualified Stock Option Agreement (Version 2), effective December 9, 2010. Form of ...adap.tv, Inc. 2007 Stock Incentive Plan. AOL Inc. 2013 Adap.tv Acquisition Stock ..., effective September 5, 2013. Amended and Restated Annual Incentive Plan for Executive Officers. X S-8 9/6/13 10....

  • Page 117
    ...The Huffingtonpost Media Group, as amended and restated, effective March 7, 2011. X S-8 4.4 3/7/11 10.29** 10.30** AOL Inc. 2013 Annual Bonus Plan - U.S. 2011 Directors' Deferred Compensation Plan. 10-Q 10.2 10.1 8/8/13 8-K 10-K 5/27/11...

  • Page 118
    ... AOL Inc., dated June 21, 2013. 10-Q 10-Q 10.4 11/5/13 11/5/13...* Stock and Asset Purchase Agreement, bc and between AOL Inc. and Microsoft Corporation... and Microsoft Corporation, dated as of June 15, 2012. Amended and Restated Interactive Marketing Agreement between AOL LLC and Google Inc., dated ...

  • Page 119
    ... Contents TOL INC. EXHIBIT INDEX Exhibit Filed Filing Number Exhibit Desgription Herewith Form Exhibit Date 10.64.../6/09 10.76* Fifteenth Amendment to the IMA, dated March 2, 2007. 10.38 11/6/09 10.77* Sixteenth Amendment to the IMA, dated September 24, 2007. 10.39 11/6/09 10.78* ...

  • Page 120
    10.82* Twentc-First Amendment to the IMA, dated November 1, 2008. Amend. 3 to Form 10 10.44 11/6/09 115

  • Page 121
    ....70 3/2/10 10.85* Consent Letter related to the IMA, dated August 19, 2008. ... of Independent Registered Public Accounting Firm. X X X X X Certification of Principal Executive Officer pursuant to Section ... to the Registrant's Annual Report on Form 10-K for the fiscal cear ended December 31, 2013....

  • Page 122
    ...Act of 2002, with respect to the Registrant's Annual Report on Form 10-K for the fiscal cear ended December 31, 2013.† Interactive Data Files Pursuant to Rule 405 of Regulation S-T: (i) Consolidated Statements of Operations for the cears ended December 31, 2013, 2012 and 2011, ...

  • Page 123
    Exhibit 10.23 AOL INC. 2013 ADAP.TV ACQUISITION STOCK INCENTIVE PLAN as Amended and Restated, effective September 5, 2013

  • Page 124
    ...Good Reason " "ISO" "NSO" "Opnion" "Opnionee" "Ounside Direcnor" "Parnicipann " "Plan" "Purchase Price" "Purchaser" "Resnricned Share Agreemenn" "Resnricned Share" "Securinies Acn" "Share" "Snock" "Snock Opnion Agreemenn" "Subsidiary " "Ten-Percenn...

  • Page 125
    ... and Nonnransferabiliny of Purchase Righns Purchase Price Transfer Resnricnions Dividends 7.5 7.6 7.7 7.8 7.9 SECTION 8. 8.1 8.2 STOCK OPTIONS. Snock Opnion Agreemenn Number of Shares; Kind of Opnion Exercise Price Term Exercisabiliny Transferabiliny of Opnions Exercise of...

  • Page 126
    ... 14.2 14.3 14.4 Section 409A. 14.5 SECTION 15. 15.1 15.2 15.3 In General Elecnive Deferrals Applicable Requiremenns Denermining "Connrolled Group" Specified Employees; Paymenn Delay Miscellaneous 14 14 14 14 15 15 15 15 15 15 iii Successors and Assigns Onher Benefin Plans Choice of Law

  • Page 127
    AOL INC. 2013 ADAP.TV ACQUISITION STOCK INCENTIVE PLAN as Amended and Restated, effective September 5,... were converted into Restricted Shares of the Company and were assumed by the Company. The Plan was initially adopted by the board of directors of Adap.tv effective April 3, 2007 and approved by the...

  • Page 128
    2.2 2.3 2.4 "Board" means the Board of Directors of the Company, as constituted from time to time. "Award" means an Option or Restricted Shares awarded or acquired pursuant to the Plan. "Award Agreemenn" means a Stock Option Agreement or Restricted Shares Agreement. 2.5 ...

  • Page 129
    ...or Outside Director and who performs bona fide services for the Company or an Affiliate, and such services are not performed in connection with the offer or sale of securities in a capital-raising transaction and do not directly or indirectly promote...

  • Page 130
    ... Global Market or The Nasdaq Capital Market of The Nasdaq Stock Market, the closing sales price per Share (or ...no sales were reported) (the "NASDAQ"), or, if no sale of Shares shall have been reported on ... date, then the immediately preceding date on which sales of the Shares have been so reported or ...

  • Page 131
    ... Inc. 2013 Adap.tv Acquisition Stock Incentive Plan, as amended from time to time. "Purchase ... Shares may be acquired under the Plan (other than upon exercise of an Option). "Purchaser" ... and a Purchaser who is awarded or acquires Restricted Shares under the Plan that contains the terms, conditions ...

  • Page 132
    ...to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other ..., during the term of the Plan, shall at all times reserve and keep available sufficient Shares to ... remain available for issuance pursuant to the Plan. If a Share previously AOL INC. 2013 A DAP.TV A ...

  • Page 133
    ... Share Agreement between the Purchaser and the Company. Such award or sale shall be subject to all applicable terms and conditions of the Plan and may be ...of Offers and Nonnransferabiliny of Purchase Righns . Any right to acquire Shares (other than an Option) shall automatically expire ...

  • Page 134
    ... Option Agreement between the Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject ... percent (100%) of the Fair Market Value of a Share on the date of grant. 7.4 Term. Each Stock Option Agreement shall specify ...

  • Page 135
    ... of the full purchase price in accordance with Section 8. Shares purchased upon the exercise of an Option shall be issued to the Participant as soon as ..., unless the cancellation and exchange occurs in connection with a change in capitalization or similar change permitted under Section 9 below. Such ...

  • Page 136
    ...amount out of the proceeds of such sale equal to the aggregate Exercise Price for the Shares being purchased and any applicable withholding taxes. 8.2 Paymenn of Purchase Price for ...other affected terms of such Awards. AOL INC. 2013 A DAP.TV A CQUISITION STOCK INCENTIVE PLAN -10-

  • Page 137
    ... of such Options, (iii) provide for the issuance of substitute Awards that will substantially preserve the otherwise applicable terms of any...to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge or consolidate or to dissolve, liquidate, sell...

  • Page 138
    ... been received by the Participant. Such Shares shall be valued at their Fair Market Value ... Shares are publicly traded at the time of exercise, arrangements may be made to meet the Optionee's or Purchaser's...form of securities market upon which Shares are then listed, or any other applicable securities...

  • Page 139
    ... Affiliate to whom the Optionee or Purchaser provides services), which rights are expressly reserved, to terminate the Employment of such person at any time and for ... any Option previously granted under the Plan without the holder's consent. AOL INC. 2013 A DAP.TV A CQUISITION ...

  • Page 140
    ...409A-3. Generally, such events and times include: a Participant's separation from service; a Participant's becoming disabled; a Participant's death; a time or a fixed schedule specified in the Plan (including ...of Section 409A. AOL INC. 2013 A DAP.TV A CQUISITION STOCK INCENTIVE PLAN -14-

  • Page 141
    ... Section 409A whether a Participant or eligible individual is employed by a member of the Company's controlled group of corporations under Section 414(b) of ... the Shares that are or have been purchased by or awarded under the Plan to the Participant are shares of "service recipient" stock within the ...

  • Page 142
    ..., Shareholder Representative Services, LLC, pursuant to which Headline Acquisition Corp. was to merge with and ... Date"). In connection with the Merger, the Company assumed this Long-Term Incentive Plan (the "Plan") and ... terms used in the Plan and not otherwise defined herein shall have the meanings ...

  • Page 143
    ... or other distribution in respect of the Shares, recapitalization, reclassification, merger, reorganization, consolidation, combination, sale of assets, split-... the Committee . Subject to the provisions of the Plan, Applicable Law, and the specific duties delegated by the Board to the Committee, the ...

  • Page 144
    ..., omission, interpretation, construction, or determination made in good faith in connection with the Plan or any Award Agreement. 3.5 Delegation to Executive Officers . To the extent permitted by Applicable Law, the Committee may delegate to one or...

  • Page 145
    ..., the Performance Objectives shall be set forth in writing no later than 90 days... certify in writing that the applicable Performance Objective(s) and any other material terms of the Award... after the applicable Performance Objectives are satisfied. ARTICLE 5 STOCK OPTIONS 5.1 Terms of Option. Subject...

  • Page 146
    ...less than 100% of the Fair Market Value per Share on the date the Option is granted. In the case... than 110% of the Fair Market Value per Share on the date the Option is granted. (c) Repricing... Options are exercisable for the first time by the Participant during any calendar year with respect to Shares...

  • Page 147
    ...equal to the gross sales price at which the broker sold the Shares to pay the exercise price. 5.5 Exercise of Option . (a) Procedure ...in a form permitted under Section 5.4 of the Plan) with respect to which the Option is exercised. (b) Termination of Relationship as a Service Provider . Following a...

  • Page 148
    ...reason other than Disability or death, and for 12 months after the Participant's Termination of Service on account of Disability or death. (c) Rights as a Stockholder . Shares subject to an Option shall be deemed issued, and the Participant shall be ...

  • Page 149
    .... ARTICLE 7 RESTRICTED STOCK 7.1 Terms of Restricted Stock. Subject to the provisions of the Plan, the Period of Restriction, the number of Shares granted, and ... . During the Period of Restriction, Service Providers holding Shares of Restricted Stock shall be entitled to receive all dividends and ...

  • Page 150
    ... to require forfeiture of such Shares if issued at no cost). ARTICLE 8 RESTRICTED STOCK UNITS 8.1 Terms of Restricted .... 8.2 Settlement of Restricted Stock Units . Subject to Section 10.5 of the Plan, the number of Shares specified in the Award Agreement, or cash equal to the Fair Market Value of ...

  • Page 151
    ... of such family members, partnerships in which such family members are the only partners, or corporations in which such family members are the only...'s counsel, all other legal matters (including any Applicable Laws) in connection with the issuance and delivery of such Shares have been satisfied, and ...

  • Page 152
    ... Company already-owned Shares having a Fair Market Value equal to the amount required by Applicable ... provides otherwise in writing. ARTICLE 11 TERM, AMENDMENT, AND TERMINATION OF PLAN 11.1 ... 11.3 Amendment of the Plan . The Board or the Committee may at any time amend, alter, suspend, or terminate ...

  • Page 153
    ... the Company or an Affiliate (such as a capital adjustment, reorganization, or merger) or the financial statements of the Company or an Affiliate, or (b) any changes in Applicable Laws or accounting principles. By way of example, the power to adjust Awards ...

  • Page 154
    ... or any other person. To the extent that any person acquires a right to receive payments from the Company (or an Affiliate) pursuant to an Award, ... of the Company (or the Affiliate, as applicable). 12.8 Headings. Headings are given to the sections and subsections of the Plan solely as a convenience ...

  • Page 155
    ... is an employee, as defined in Section 3401(c) of the Code, of the HuffingtonPost. Neither service as a member of the board of directors nor payment of a director's fee by the HuffingtonPost shall be sufficient to constitute "employment" by the HuffingtonPost....

  • Page 156
    ... market in which such prices are regularly quoted) (the " NeSDeQ"), or, if no sale of Shares ... (ii) if there should not be a public market for the Shares on such date, the Fair ... the recipient to receive Shares or cash after a Period of Restriction, as described in Article 8 of the Plan. (x) "Service ...

  • Page 157
    ...described in Article 6 of the Plan. (aa) "Tax Year" means the Company's taxable year. (bb) "Termination of Service" means the date an individual ceases to be ...return to service within three months; such Termination of Service shall be effective as of the first day that is more than three ...

  • Page 158
    ...shall report directly to the Chief Executive Officer. Executive will be expected to perform services for Company at Company's..., less applicable withholdings, which is $750,000.00 on an annual basis ("Base Salary... day. Executive's Base Salary will be reviewed annually during the Employment Term and may...

  • Page 159
    ...Base Salary, Executive will be eligible to participate in Company's Annual Bonus Plan (the "ABP"), pursuant to its terms ...%) of Executive's Base Salary effective as of July 1, 2013. For calendar year 2013, Executive's ABP ... base salary prior to July 1, 2013. 4. A new subsection 4D(iv) is hereby added ...

  • Page 160
    ...otherwise provided in the applicable award agreement, any Additional Stock Option that is unvested on the date of Executive's termination for ...be forfeited on such date of termination. 5. The following language is added to the end of Paragraph 4.D(iii)(e) of the Employment Agreement: Notwithstanding...

  • Page 161
    8. Employment Agreement Terms. Except as provided in this First Amendment, all terms and conditions of the Employment Agreement shall remain in effect and shall not be altered by this First Amendment. (Signature page to First Amendment follows ) 4

  • Page 162
    ..., the parties hereto have executed this First Amendment as of the date first written above. AOL INC. By: /s/ Julie Jacobs Name: Julie Jacobs Title: EVP and General Counsel EXECUTIVE /s/ Karen Dykstra Karen Dykstra Executive Vice President and Chief Financial and Administrative Officer 5

  • Page 163
    ...replaced with the following: Base Salary . During the Employment Term and effective as of October 1, 2013 Company ...monthly, less applicable withholdings, which is $650,000.16 on an annual basis ("Base Salary").... day. Executive's Base Salary will be reviewed annually during the Employment Term and may...

  • Page 164
    ...be otherwise provided in the applicable award agreement, any Additional Stock Option that is unvested on the date of Executive's termination for any ... otherwise provided in the applicable award agreement, any Additional Performance Share that is unvested on the date of Executive's termination for any...

  • Page 165
    5. Employment Agreement Terms. Except as provided in this Fourth Amendment, all terms and conditions of the Employment Agreement shall remain in effect and shall not be altered by this Fourth Amendment. (Signature page to Fourth Amendment follows) 3

  • Page 166
    IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment as of the date first written above. AOL INC. By: Name: Title: /s/ Karen Dykstra Karen Dykstra Chief Financial Officer EXECUTIVE /s/ Julie Jacobs Julie Jacobs Executive Vice President and General Counsel 4

  • Page 167
    ...[****] The Amended and Restated Interactive Marketing Agreement between AOL, Inc. and Google Inc., Section 6.5(a)(i) The WebSearch Services Agreement between AOL,... cc: Paul Griffith, Senior Director, Corporate Business Development Francis Lobo, SVP, Search & Distribution

  • Page 168
    ... Interactive Marketing Agreement between AOL, Inc. and Google Inc., Section 6.5(a)(i) The WebSearch Services ..."Change of Control: Change of Control of AOL: Right to Terminate", shall now read as follows: "Either party... ")." Kind regards, Google, Inc. cc: President for AOL Media Networks AOL Deputy ...

  • Page 169
    ... Japan Kabushiki Kaisha Advertising.com LLC AOL Canada Corp. AOL Internet Services Holdings Inc. AOL Fulfillment Services LLC AOL Internet Services Inc. CompuServe Interactive...tv") AOL Europe Holdings (2) Media & Cie S.e.n.c. (Trading as "TheHuffingtonPost International") Le Huffington Post ...

  • Page 170
    ... Inc. and the effectiveness of internal control over financial reporting included in this Annual Report (Form 10-K) of AOL Inc. for the year ended December 31, 2013. /s/ Ernst & Young LLP New York, New York February 19, 2014

  • Page 171
    ... financial reporting (as defined in Exchange Act Rules 1ca-15(f) and 15d-15...'s auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions... financial information; and b. Any fraud, whether or not material, that involves management or other ...

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    ...3. 4. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2013 of AOL Inc.; Based on my knowledge... to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a. All ...

  • Page 173
    ...18 U.S.C. SECTION 1350, AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report on Form 10-K for the year ended December 31, 2013 of AOL Inc. ("the Company"), as filed with the Securities and Exchange ...

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