America Online Posts Record Earnings.Business Editors/Hi-Tech Writers DULLES, Va.--(BUSINESS WIRE)--April 18, 2000 Company's FY2000 Third Quarter Income, Fully Taxed and Excluding One-time Gains, Rises 161% to $271 Million, or $0.11 Per Share Consolidated Revenues Increase 47% to $1.8 Billion; Advertising, Commerce & Other Revenues More Than Double to $557 Million AOL (A division of Time Warner, Inc., New York, NY, www.aol.com) The world's largest online information service with access to the Internet, e-mail, chat rooms and a variety of databases and services. Service Adds 1.7 Million New Members for Total of 22.2 Million EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become Climbs 120% to $492 Million America Online See AOL. , Inc. (NYSE NYSE See: New York Stock Exchange : AOL) today announced record results for the third quarter of fiscal 2000, ended March 31, 2000 -- reaching new highs for consolidated revenues, advertising and commerce revenues, operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , and EBITDA . The quarter's net income, fully taxed and excluding one-time items, totaled $271 million, or $0.11 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, up from $104 million, or $0.04 per diluted share, on the same basis last year. The Company reported net income of $438 million, or $0.17 per diluted share, up from $411 million, or $0.16 per diluted share, in fiscal 1999's third quarter. Reported net income included one-time gains from the sale of investments totaling $275 million this quarter and $567 million in last year's third quarter. The year-ago quarter also includes one-time charges of $103 million. Excluding these items, operating income for the quarter climbed more than 155% over the year-ago quarter to $383 million. Third quarter revenues rose to $1.8 billion, or 47% over last year's March quarter. Advertising, commerce and other revenues climbed 103% over fiscal 1999's third quarter to $557 million - marking a record $120 million increase, or 27%, over this year's second quarter. The AOL service added 1.7 million new members worldwide, and finished the quarter with 22.2 million subscribers. During the quarter, the CompuServe 2000 service added 373,000 members, bringing the combined CompuServe 2000 and CompuServe Classic membership to 2.7 million. Gateway.net added more than 100,000 subscribers for a worldwide total of more than 850,000. In total, the Company added 2.0 million new subscribers worldwide and ended with 25.8 million subscribers of its family of interactive services. Steve Case Steve Case (born August 21, 1958) is a businessman best known as the co-founder and former chief executive officer and chairman of America Online (AOL). He reached his highest profile when he played an instrumental role in AOL's merger with Time Warner in 2000. , Chairman and Chief Executive Officer, said: "This quarter's results underscore The underscore character (_) is often used to make file, field and variable names more readable when blank spaces are not allowed. For example, NOVEL_1A.DOC, FIRST_NAME and Start_Routine. (character) underscore - _, ASCII 95. the tremendous strength of America Online's operations, and demonstrate that we are on a clear path to continued strong growth and increased profitability. Since we announced our landmark merger with Time Warner, we haven't missed a beat." Mr. Case added: "At the same time, we have taken major strides to expand our success by leading the Internet's next wave of growth. Specifically, we are fast turning the great promise of 'AOL Anywhere' into reality, we've launched breakthrough Netscape browser See Netscape. technology to enrich the Internet experience, and we are actively building the medium in key markets around the world. In short, our results highlight just how strong America Online is today, and how well-positioned it is for the future." Bob Pittman, President and Chief Operating Officer Chief Operating Officer (COO) The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , said: "This quarter is an excellent example of how America Online is uniquely positioned in the Internet industry. We have built an unmatched collection of interactive brands, which will be further enhanced by the Time Warner merger, and we have an unparalleled connection to consumers. We're taking online advertising and commerce to new heights, yet we've barely scratched the surface in terms of the impact our medium can have." Mr. Pittman added: "Looking to the future, we are rolling out our 'AOL Anywhere' strategy on multiple fronts - from wireless to broadband broadband Term describing the radiation from a source that produces a broad, continuous spectrum of frequencies (contrasted with a laser, which produces a single frequency or very narrow range of frequencies). content, Internet appliances Also called "information appliance," "smart appliance," and "Web appliance," it is a device specialized for accessing the Web and/or e-mail. Designed for ease of use, it plugs into a telephone jack or LAN connection for Internet hookup. to AOL TV AOL TV was the name of both a thin client which uses a television for display (rather than a monitor), and the online service that supports it, both of which were launched in June 2000 to compete with WebTV. The product and service were developed by America Online. - delivering even more value and convenience to our members. We have stepped up our international expansion, with AOL Europe growing at a record pace and several Latin American launches planned over the next year. With Netscape 6 and the Gecko gecko (gĕk`ō), small or medium-sized lizard of the family Gekkonidae. The more than 300 species are distributed throughout the warm regions of the world, mostly in the Old World. Despite folklore to the contrary, their bite is not poisonous. technology, we are driving the Internet experience to multiple devices and stimulating a new generation of Web-based applications See Web application. for the PC and other devices. All these initiatives will help ensure that we make the most of Time Warner's assets, and our transition team is already working to identify the most promising opportunities." For the nine-month period ending March 31, 2000, fully taxed net income, excluding one-time items, was $679 million and total revenues were $4.9 billion, compared to fully taxed net income, on a comparable basis, of $240 million and total revenues of $3.4 billion in the corresponding period of fiscal 1999. Key operating metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. from the quarter included: --Subscription Revenues: Quarterly subscription revenues reached $1.15 billion, up 33%, from $869 million during fiscal 1999's corresponding quarter. --Advertising, Commerce and Other Revenues: Revenues from advertising, commerce and other revenues climbed to $557 million - an increase of 103% from $275 million during the year-ago quarter, and an increase of 27%, or a record $120 million, over this year's second quarter. --Backlog: The Company brought its consolidated backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. of advertising and commerce revenue to more than $2.7 billion at the end of the quarter, up from $2.4 billion on December 31, 1999. --AOL Member Usage: AOL members averaged 64 minutes daily online during the quarter, an increase of 16% over last year's third quarter. --Sales and Marketing Expenses: Consolidated sales and marketing expenses declined to 14.5% of revenues, compared with 17.4% in fiscal 1999's third quarter. --Operating Income: Operating income grew 155% to $383 million, or 20.9% of revenue, up from 12.0%, excluding one-time charges, a year ago. --EBITDA: EBITDA rose to a record $492 million for the quarter, a 120% increase over a year ago, with EBITDA margins at 27%. AOL Time Warner Merger Update Working closely together in anticipation of their merger, America Online and Time Warner this quarter launched a number of cross-promotional agreements involving their world-class brands. These joint initiatives include: Record-setting Warner Music downloads A music download refers to the transferring of a music file from an Internet-facing computer or website to a user's local computer. This term encompasses both legal downloads and downloads of copyright material without permission or payment if required. through America Online's Winamp and Spinner; Time Inc.'s Real Simple magazine signing up a record 27,000 subscribers in just five weeks through promotion on the AOL service; AOL Keywords appearing on the covers of Time, Fortune, Money, People, Entertainment Weekly, Real Simple and Teen People -- reaching 88 million readers; CNN CNN or Cable News Network Subsidiary company of Turner Broadcasting Systems. It was created by Ted Turner in 1980 to present 24-hour live news broadcasts, using satellites to transmit reports from news bureaus around the world. Interactive becoming the premier news partner for Netcenter and ICQ ("I Seek You") A conferencing program for the Internet from Mirabilis, Tel Aviv, Israel (www.icq.com). It provides interactive chat, e-mail and file transfer and can alert you when someone on your predefined list has also come online. ; and Warner Bros BROS Brothers BROS Benefits and Retirement Operations Section (King County, Washington) BROS Barnes and Richmond Operatic Society (London, UK) . movies and Entertainment Weekly being featured on AOL MovieFone. The companies also announced a Memorandum of Understanding A Memorandum of Understanding (MoU) is a legal document describing a bilateral or multilateral agreement between parties. It expresses a convergence of will between the parties, indicating an intended common line of action and may not imply a legal commitment. that sets out a framework for "open access" agreements to offer the AOL service and other ISPs over Time Warner's broadband cable systems. The Companies expect to close the merger in the fall. Interactive Services Group Highlights During the quarter, the Company advanced its "AOL Anywhere" strategy through a number of key initiatives: -- AOL Wireless: In the US, America Online announced seven major agreements with a range of wireless carriers and device manufacturers - including Sprint PCS (1) (Personal Communications Services) Refers to wireless services that emerged after the U.S. government auctioned commercial licenses in 1994 and 1995. This radio spectrum in the 1. , Nokia, Motorola, Research in Motion, BellSouth Wireless See BellSouth Intelligent Wireless Network. Data, RTS (Request To Send) An RS-232 signal sent from the transmitting station to the receiving station requesting permission to transmit. Contrast with CTS. 1. (operating system) RTS - run-time system. 2. Wireless and Arch Communications - to deliver popular AOL features and services to millions of wireless consumers. The Company also announced the new "AOL Mobile Messenger" service, which will offer wireless access to AOL's e-mail and AOL Instant Messenger (AIM) applications over personal, mobile paging devices. To lead this wireless initiative, America Online named former FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of Time Warner Telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. , Dennis Patrick, President of AOL Wireless. -- AOL/Gateway Internet Appliances: At Spring Internet World 2000 earlier this month, the Company unveiled the groundbreaking AOL/Gateway family of specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. Internet appliances - AOL Gateway countertop appliance, wireless Web pad See Webpad. and desktop appliance - that will extend the "AOL Anywhere" strategy. Using Netscape's Gecko browser browser Software that allows a computer user to find and view information on the Internet. The first text-based browser for the World Wide Web became available in 1991; Web use expanded rapidly after the release in 1993 of a browser called Mosaic, which used engine technology and the Linux operating system operating system (OS) Software that controls the operation of a computer, directs the input and output of data, keeps track of files, and controls the processing of computer programs. , these appliances with the "Instant AOL" feature - which automatically launches the service as soon as the device is switched on - will make AOL's content, features and services conveniently available to consumers in every room of their homes. -- AOL TV: The AOL TV service is scheduled to begin shipping in June. AOL TV will provide state-of-the-art navigational services, a new genre of interactive programming and a new marketing platform -- taking full advantage of Time Warner properties. -- AOL Plus Broadband Content: This month, AOL Plus launched to deliver rich multimedia content and features, such as streaming audio A one-way audio transmission over a data network. It is widely used on the Web as well as company networks to play audio clips and Internet radio. Computers in home networks stream audio (mostly music) to digital media hubs connected to home theaters. and video, to AOL members using AOL 5.0 over any high-speed connection - TCP/IP TCP/IP in full Transmission Control Protocol/Internet Protocol Standard Internet communications protocols that allow digital computers to communicate over long distances. , DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary , cable or satellite - while still enabling them to access regular AOL 5.0 content when using narrowband In communications, transmission rates up to T1 speeds (1.544 Mbps). The upper limit is moving target. At one time, narrowband meant 150 bps (that is 150 bits per second!). Then, the upper limit became 2,400 bps. Later, it moved to 64 Kbps. Contrast with wideband and broadband. connections. Extending its advertising and commerce leadership, the Company announced a series of significant advertising/commerce alliances this quarter with such market leaders as General Motors, American Airlines American Airlines Major U.S. airline. American was created through a merger of several smaller U.S. airlines and incorporated in 1934. It continued to buy the routes of other airlines, becoming an international carrier in the 1970s; its routes include South America, the , Sears, Kinko's, Footlocker.com, Oxygen Media, and PurchasePro.com. Among the newest AOL member benefits is AOL AAdvantage - the world's largest online customer loyalty program - scheduled to launch this summer in partnership with American Airlines through America Online's digital marketing service DMS (1) (Document Management System) See document management. (2) (Defense Messaging System) An X.500-compliant messaging system developed by the U.S. Dept. of Defense. - to provide members more ways to earn miles and redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. them. In addition, the Company launched its AOL Insider Savings Club, an exclusive new program that enables members to save money on a wide range of popular goods and services In economics, economic output is divided into physical goods and intangible services. Consumption of goods and services is assumed to produce utility (unless the "good" is a "bad"). It is often used when referring to a Goods and Services Tax. . In addition, the Company's other interactive brands enjoyed substantial growth and made themselves even more valuable. Since its launch just over a year ago, CompuServe 2000 has continued its strong momentum in the value segment, adding 373,000 new members in the quarter for a total of nearly 1.4 million members worldwide. Average member daily usage also achieved an all-time high during the quarter. During the quarter, the Netscape Netcenter service surpassed 28 million registered users worldwide, more than doubling its total over a year ago. And Time Warner's CNN Interactive became the premier news partner for Netcenter. This month, Netscape announced the preview release of its next-generation Netscape 6 Internet browser See Web browser. and communications software (communications, software) communications software - Application programs, operating system components, and probably firmware, forming part of a communication system. These different software components might be classified according to the functions within the Open Systems suite, powered by the innovative Netscape Gecko browser engine. The new browser enhances the consumer experience by integrating popular communication and information services See Information Systems. in a faster, more flexible and easier to use format. As announced in March, IBM (International Business Machines Corporation, Armonk, NY, www.ibm.com) The world's largest computer company. IBM's product lines include the S/390 mainframes (zSeries), AS/400 midrange business systems (iSeries), RS/6000 workstations and servers (pSeries), Intel-based servers (xSeries) , Intel, Liberate (Liberate Technologies, San Mateo, CA) A software company that specialized in the information appliance field. Formerly Network Computer, Inc. (NCI), a spin-off from Oracle in 1996, it changed its name in 1999. , NetObjects, Nokia, Red Hat and Sun Microsystems Sun Microsystems, Inc. (NASDAQ: JAVA[3]) is an American vendor of computers, computer components, computer software, and information-technology services, founded on 24 February 1982. will use Gecko technology to extend the convenience and power of the Web to a wide range of Internet devices. This quarter, AOL Instant Messenger See AIM. and AOL's Buddy List A list of colleagues, workgroup members, friends, etc., that you might wish to communicate with via instant messaging. See instant messaging. service added 21 million registrants for a worldwide total of 91 million. Last week, the Company launched its next-generation AOL Instant Messenger, AIM 4.0, featuring AIM Talk, which enables online voice communication between AIM users, and Instant Images, which allows users to exchange images and sounds. Interactive Properties Group Highlights ICQ, already the world's largest online communications community and the biggest international service, continued to add an average of more than 100,000 registered users daily - adding a total of 9.3 million during the quarter to finish with 62.4 million registered users. Over the quarter, peak simultaneous users of ICQ climbed from 1.2 million to 1.4 million. The average user kept ICQ on the desktop for nearly three hours, actively using it 75 minutes each day. Next week, ICQ will launch its newest version, ICQ 2000A, that will offer enhanced community features, improved navigation and user interface, and the capability of operating in the workplace. In addition, DMS partnered with Netcentives, a leading developer of e-marketing infrastructure software and services, to bring "ICQ ClickRewards" - a rewards program for ICQ users. During the quarter, Digital City continued to widen wid·en tr. & intr.v. wid·ened, wid·en·ing, wid·ens To make or become wide or wider. wid  en·er n. its lead in the
fast-growing local online market. Digital City launched its new version
of the service - Digital City 2000 - which sets the gold standard in
consumer convenience and compelling services for both local residents
and visitors.Tomorrow, Digital City will complete its expansion from 60 markets to more than 200 markets to create the first "local everywhere" coast-to-coast network. Advancing the "AOL Anywhere" strategy, Digital City also announced the planned launch of Digital City Wireless to deliver the service's most popular features to wireless phones, pagers and other handheld devices. Finally, Digital City posted record growth in local advertising and e-commerce with more than 2,000 partners. With the Internet music market exploding, the Company's Web music brands, Winamp and Spinner, continued to record strong growth in users. Winamp remains the #1 favorite music player and ranked #2 - behind #1 ICQ - in 1999 downloads on download.com. Together, Winamp and Spinner reach a total of 10 million unique users each month. During the quarter, Spinner, Winamp and Warner Music's Elektra Entertainment Group partnered to deliver secure downloads from The Cure's latest album, "The Last Days of Summer." In just a month, there were 58,000 downloads - the most licenses ever issued for a digital song in a one-month period. In addition, Spinner and Winamp are promoting such Warner Music artists as Madonna and Faith Hill with featured downloads of their popular singles as well as artist-created music channels. In addition, Winamp and Spinner partnered with Myplay, inc., the first online digital music service to provide their users with a virtual "locker Things commonly known as lockers include:
AOL MovieFone, the nation's largest movie listing guide and ticketing service, attracts about 20% of all moviegoers through both its 777-FILM phone service and the MovieFone.com Web site. AOL MovieFone announced several new services during the quarter - including the ability to print bar-coded movie tickets at home to avoid lines at the theater, and the AOL MovieFone/American Express industry-wide frequent moviegoer mov·ie·go·er n. One who goes to see movies. mov ie·go ing adj. program.AOL International Group Highlights During the quarter, AOL International's membership in its AOL and CompuServe services increased by 434,000 to a total of 4.4 million. Extending its standing as Europe's leading multinational Internet provider Internet provider - Internet Service Provider , AOL Europe's AOL and CompuServe services reached nearly 3.5 million members with record growth in the UK, Germany and France. In addition, registered users of the subscription-free Netscape Online service in the UK increased to 519,000. Underscoring the Company's commitment to global expansion, America Online announced in March an agreement with Bertelsmann AG Bertelsmann AG German media company. Beginning as a religious printer and publisher in 1835, the company grew steadily over the next century. Though virtually destroyed by Allied bombing in 1945, it recovered quickly after World War II. to restructure their interests in the AOL Europe and AOL Australia joint ventures. At the option of either company after January 31, 2002, America Online would acquire Bertelsmann's interest in AOL Europe. America Online and Bertelsmann also launched a new $250 million, four-year strategic global alliance to expand the availability of Bertelsmann's leading media content and e-commerce properties over America Online interactive brands. Following the Bertelsmann agreement, America Online formed a 50/50 joint venture with AAPT AAPT American Association of Physics Teachers AAPT Association of Asphalt Paving Technologists AAPT American Association of Philosophy Teachers AAPT American Association of Pharmacy Technicians AAPT Australian Association for Psychological Type Limited, Australia's third largest telecommunications company See telecom company. , to operate AOL Australia's interactive services and to develop a fully integrated Internet portal to deliver AOL-branded content services to Australia's emerging consumer wireless market. AOL Europe extended the Company's "AOL Anywhere" strategy with key wireless agreements with Nokia, Ericsson and RTS Wireless to ensure its mobile portals are compatible with current SMS (1) (Storage Management System) Software used to routinely back up and archive files. See HSM. (2) (Systems Management Server) Systems management software from Microsoft that runs on Windows NT Server. and WAP (1) (Wireless Access Point) See access point. (2) (Wireless Application Protocol) A standard for providing cellular phones, pagers and other handheld devices with secure access to e-mail and text-based Web pages. protocols and handsets, as well as next-generation General Packet Radio Service. Netscape Enterprise Highlights Third quarter revenues for Netscape Enterprise--including software licenses In computing, software that is copyrighted and licensed under a software license is done under a variety of licensing schemes. For end-users there are proprietary licenses and there are free software licenses, and there are proprietary Within these schemes are further classifications. and services--grew 8% sequentially to $126 million. Of that total, revenues from international licenses more than doubled to $47 million. During the quarter, the Sun-Netscape Alliance (Sun-Netscape Alliance, Santa Clara, CA) A joint venture of Sun and Netscape to market Netscape's Web-based software products. The Alliance was formed when AOL acquired Netscape in 1999 to take advantage of the fact that the bulk of Netscape software was already running on Sun hardware. - under the "iPlanet E-Commerce Solutions" brand - launched a global initiative to solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. its position as the world's largest and broadest supplier of e-commerce software. The Alliance announced new agreements, valued over one-million dollars each, with twenty-three companies and governmental agencies worldwide, including CentreComm, Xerox, Telestra, Eplus and the US Department of Defense. The Alliance also launched new strategic partnerships with: -- Palm, Inc. to provide global wireless access to enterprise applications and services via Palm OS handheld computers A computing device that can be easily held in one hand while the other hand is used to operate it. The Palm devices are a popular example. See Palm, smartphone and palmtop. ; -- Red Hat Linux Red Hat Linux, assembled by Red Hat, was a popular, "middle-aged" Linux distribution (not as old as Slackware but older than Ubuntu) upon its discontinuation in 2004.[1] Red Hat Linux 1.0 was released on November 3, 1994. to add iPlanet Messaging Server and iPlanet Web Server See Sun Java System Web Server. to the portfolio of products available on Linux; and -- GE Global eXchange Services, a division of General Electric, to incorporate their RMS (1) (Record Management Services) A file management system used in VAXs. (2) (Root Mean Square) A method used to measure electrical output in volts and watts. 1. RMS - Record Management Services. 2. data transformation technology into iPlanet ECXpert software. The Company's earnings conference call can be heard live on the Internet via AOL.COM at 5:00 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT on Tuesday, April 18. To listen to the call, visit http://www.corp.aol.com/investors.shtml? or AOL Keyword: IR. About America Online Inc. Founded in 1985, America Online, Inc., based in Dulles, Virginia Dulles, Virginia is an unincorporated census-designated place located in Loudoun County, Virginia, part of the Washington Metropolitan Area. The headquarters of AOL, Orbital Sciences Corporation and ODIN technologies and the former headquarters of MCI Inc. are located in Dulles. , is the world's leader in interactive services, Web brands, Internet technologies, and e-commerce services. America Online, Inc. operates: two worldwide Internet services, America Online, with more than 22 million members, and CompuServe, with more than 2.7 million members; several leading Internet brands including ICQ, AOL Instant Messenger and Digital City, Inc.; the Netscape Netcenter and AOL.COM portals; Netscape 6 and the Netscape Navigator An earlier Web browser for Windows, Macintosh and X Windows from Netscape that provided secure transmission over the Internet. Soon after its introduction in 1994, Navigator, or just "Netscape," as it was commonly called, quickly became the leading browser on the Web. and Communicator browsers; AOL MovieFone, the nation's #1 movie listing guide and ticketing service; and Spinner.com and NullSoft's Winamp, leaders in Internet music. Through its strategic alliance with Sun Microsystems, the company develops and offers easy-to-deploy, end-to-end e-commerce and enterprise solutions for companies operating in the Net Economy. This release contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the "safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. " provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. These statements are based on management's current expectations or beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The forward-looking statements in this release address the following subjects: future financial and operating results; the proposed AOL/Time Warner merger; subscriber, usage and commerce growth; new markets, products, services, features and content; timing and benefits of acquisitions and other alliances; and availability, benefits, and timing of deployment, of new access and distribution technologies. The following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: inability to obtain, or meet conditions imposed for, governmental approvals for the merger; failure of the AOL or Time Warner stockholders to approve the merger; the risk that the AOL and Time Warner businesses will not be integrated successfully; costs related to the merger; inability to further identify, develop and achieve commercial success for new products and services and access and distribution technologies; increased competition and its effects on pricing, spending, third-party relationships, the subscriber base and revenues; inability to establish and maintain relationships with commerce, advertising, marketing, technology and content providers; risk of accepting warrants in certain agreements; risks of new and changing regulation in the U.S. and internationally. For a detailed discussion of these and other cautionary statements, please refer to the Company's filings with the Securities and Exchange Commission, especially in the "Forward-Looking Statements" section of the Management's Discussion and Analysis Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial section of the Company's Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended June 30, 1999 and the Risk Factors section of the Company's S-3 filing S-3 Filing The most simplified registration form. It can only be used by companies that have been required to report under the '34 Act for a minimum of twelve months and have met the timely filing requirements set forth under Form S-2. that became effective in November 1999.
America Online, Inc.
Consolidated Summary of Results
(Amounts in millions, except per share data)
(Unaudited)
Three months ended Nine months ended
March 31, March 31,
------------------ ------------------
2000 1999 2000 1999
-------- ------- ------- -------
Revenues:
Subscription services $ 1,153 $ 869 $ 3,215 $ 2,378
Advertising, commerce
and other 557 275 1,344 694
Enterprise solutions 126 109 365 328
------- ------- ------- -------
Total revenues 1,836 1,253 4,924 3,400
Costs and expenses:
Cost of revenues 937 693 2,558 1,916
Sales and marketing 266 218 736 594
Product development 76 80 217 217
General and administrative 156 120 423 297
Amortization of goodwill 18 17 53 49
Merger & restructuring
charges -- 78 5 80
------- ------- ------- -------
Total costs and
expenses 1,453 1,206 3,992 3,153
Income from operations 383 47 932 247
Other income, net 336 587 533 608
------- ------- ------- -------
Income before provision
for income taxes 719 634 1,465 855
Provision for
income taxes (281) (223) (572) (253)
------- ------- ------- -------
Net income $ 438 $ 411 $ 893 $ 602
======= ======= ======= =======
Earnings per
share-diluted $ 0.17 $ 0.16 $ 0.35 $ 0.24
Earnings per
share-basic $ 0.19 $ 0.20 $ 0.40 $ 0.29
Weighted average shares
outstanding-diluted 2,595 2,574 2,593 2,531
Weighted average shares
outstanding-basic 2,287 2,088 2,255 2,044
America Online, Inc.
Supplemental Information
(Amounts in millions, except per share data)
(Unaudited)
Three months Three months Three months
ended ended ended
3/31/00 3/31/99 12/31/99
------------- -------------- --------------
Income before taxes $ 719 $ 634 $ 444
Adjustments for
one-time items:
Gain on sale of
Excite investments -- (567) --
Merger/Restructuring
Charges -- 78 5
Transition expenses -- 25 --
Acquisition of
Gateway.net subscribers -- -- 30
Recognized gain related
to investments (275) -- (111)
--------- --------- ----------
Adjusted income before taxes 444 170 368
--------- --------- ----------
Assumed tax provision (173) (66) (144)
--------- --------- ----------
Income net of assumed
tax provision $ 271 $ 104 $ 224
========= ========= ===========
Diluted earnings per
share excluding
one-time items:
--------------
Earnings per share
- diluted (1) $ 0.11 $ 0.04 $ 0.09
Weighted average shares
outstanding
- diluted (1) 2,495 2,380 2,494
Other Selected Data
-------------------
EBITDA $ 492 $ 224 $ 400
Net cash provided
by operations $ 483 $ 631 $ 328
Free cash flow $ 289 $ 560 $ 113
Cash Earnings (2) $ 335 $ 151 $ 272
Cash Earnings per share $ 0.13 $ 0.06 $ 0.11
Nine months Nine months
ended 3/31/00 ended 3/31/99
------------- --------------
Income (loss) before taxes $ 1,465 $ 855
Adjustments for one-time items:
Gain on sale of Excite
investments -- (567)
Merger / Restructuring Charges 5 80
Transition expenses -- 25
Acquisition of Gateway.net
subscribers 30 --
Recognized gain related to
investments (386) --
--------- ---------
Adjusted income before taxes 1,114 393
--------- ---------
Assumed tax provision (435) (153)
--------- ---------
Income net of assumed
tax provision $ 679 $ 240
========= =========
Diluted earnings per
share excluding one-time items:
------------------------------
Earnings per share - diluted (1) $ 0.27 $ 0.10
Weighted average shares
outstanding - diluted (1) 2,483 2,339
Other Selected Data
EBITDA $ 1,234 $ 557
Net cash provided by
operations $ 1,283 $ 929
Free cash flow $ 722 $ 696
Cash Earnings (2) $ 839 $ 372
Cash Earnings per share $ 0.34 $ 0.16
(1) Weighted average shares outstanding based on fully taxed
diluted share calculation including common stock equivalents.
(2) Cash earnings equals net income excluding one-time charges and
depreciation and amortization (tax effected).
America Online, Inc.
Consolidated Balance Sheets
(Amounts in millions)
March 31, June 30,
2000 1999
ASSETS ----------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 2,655 $ 887
Short-term investments 482 537
Trade accounts receivable, net 397 323
Other receivables, net 271 79
Prepaid expenses and other
current assets 395 153
-------- --------
Total current assets 4,200 1,979
Property and equipment
at cost, net 991 657
Other assets:
Investments including
available-for-sale securities 4,791 2,151
Product development costs, net 135 100
Goodwill and other intangible
assets, net 404 454
Other assets 240 7
------- -------
Total assets $10,761 $ 5,348
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 169 $ 74
Other accrued expenses
and liabilities 933 795
Deferred revenue 941 646
Accrued personnel costs 207 134
Deferred network services credit 76 76
-------- --------
Total current liabilities 2,326 1,725
Long-term liabilities:
Notes payable 1,622 348
Deferred revenue 269 30
Other liabilities 13 15
Deferred network
services credit 140 197
------- -------
Total liabilities 4,370 2,315
Stockholders' equity :
Common stock 23 22
Unrealized gain on
available-for-sale securities 1,062 168
Additional paid-in capital 4,272 2,692
Retained earnings 1,034 151
--------- --------
Total stockholders' equity 6,391 3,033
--------- --------
Total liabilities and
stockholders' equity $10,761 $ 5,348
========= ========
America Online, Inc.
Consolidated Statements of Cash Flows
(Amounts in millions)
(Unaudited)
Three months Nine months
ended March 31, ended March 31,
2000 1999 2000 1999
---- ----- ----- ------
Cash flows from
operating activities:
Net income $ 438 $ 411 $ 893 $ 602
Adjustments to reconcile
net income to net
cash provided by
operating activities:
Non-cash restructuring
charges -- 7 2 7
Amortization of deferred
network services credit (19) (19) (57) (57)
Depreciation and
amortization 105 77 262 216
Compensatory stock options 4 11 10 19
Gain on available-for-sale
securities (279) (568) (403) (570)
Deferred income taxes 268 226 557 253
Changes in assets and
liabilities net of effects
of acquisitions
and dispositions:
Trade accounts
receivable (25) (47) (74) (92)
Other receivables (9) (60) (41) (79)
Prepaid expenses and other
current assets (119) (6) (236) (48)
Other assets (77) (2) (202) (1)
Investments including
available-for-sale
securities (122) 29 (267) 10
Accrued expenses and
other current
liabilities 27 415 309 455
Deferred revenue and
other liabilities 291 157 530 214
------- ------ -------- ------
Total adjustments 45 220 390 327
------- ------ -------- ------
Net cash provided
by operating activities 483 631 1,283 929
Cash flows from
investing activities:
Purchase of property
and equipment (172) (60) (501) (201)
Product development costs (22) (11) (60) (32)
Proceeds from sale
of investments
including available-for-sale
securities 211 580 227 606
Purchase of investments
including
available-for-sale
securities (502) (93) (804) (214)
Proceeds from S/T
investments, net 36 17 54 132
Proceeds from
acquisition/disposition
of subsidiaries -- 6 10 31
Other investing activities (16) (33) (12) (49)
------- ------ -------- ------
Net cash (used in) provided
by investing activities (465) 406 (1,086) 273
Cash flows from
financing activities:
Proceeds from issuance
of common stock, net 74 115 333 778
Principal and accrued
interest payments on debt (2) (2) (13) (13)
Payment of deferred finance
costs and other financing
activities, net (1) -- (30) 8
Proceeds from issuance
of debt 31 -- 1,281 29
------- ------ -------- ------
Net cash provided by
financing activities 102 113 1,571 802
------- ------ -------- ------
Net increase in cash
and cash equivalents 120 1,150 1,768 2,004
Cash and cash equivalents
at beginning of period 2,535 1,531 887 677
------- ------ -------- ------
Cash and cash equivalents
at end of period $ 2,655 $ 2,681 $ 2,655 $ 2,681
======= ======= ======= =======
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