America Online Reports a Four-Fold Increase in Fully Taxed Earnings Per Share to 17 Cents On a 62% Gain in Revenues for FY99 Second Quarter.DULLES Dul·les , Allen Welsh 1893-1969. American public official. Director of the CIA (1953-1961), he resigned after the failed invasion of the Bay of Pigs. Noun 1. , Va.--(BUSINESS WIRE)--Jan. 27, 1999-- Advertising, Commerce and Other Revenues Rise 66% to Record $181 Million Record 1.6 Million New Members Join Service in December December: see month. Quarter America Online See AOL. , Inc. (NYSE NYSE See: New York Stock Exchange :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. ) today announced results for its fiscal second quarter of 1999, ending December 31, 1998, setting new records in total revenues, advertising, commerce and other revenues, net income and membership growth. The Company's net income totaled $88 million, or $0.17 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, on a fully taxed basis for the 1999 second quarter, a 340% increase over last year's second quarter fully taxed net income of $20 million, or $0.04 per diluted share. Because the Company's tax provision continues to be substantially offset by utilization of its net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. carryforward carryforward 1. A business operating loss that, for tax purposes, may be claimed a certain number of years in the future, often up to 15 years. , reported net income for the quarter totaled $121 million, or $0.22 per share on a diluted basis, as compared with $33 million, or $0.06 per share on the same basis in last year's corresponding quarter. Total revenues increased by 62% over the same quarter last year to $960 million. Advertising, commerce and other revenues reached $181 million, up 66% over last year's second quarter. For the six-month period ending December 31, 1998, fully taxed net income and total revenues were $157 million, and $1.8 billion respectively, compared to fully taxed net income of $38 million and total revenues of $1.1 billion in the corresponding period of fiscal 1998. AOL membership grew at a record pace in the quarter with 1.6 million net new members joining the service and bringing the total worldwide membership of the world's leading Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the online service to 15.1 million on December 31, 1998. With CompuServe's approximately 2 million members, the Company has a total of more than 17 million paying members worldwide, as well as millions of users of its various Web brands. 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 of America Online, said: "With this quarter's record results, we continued to build excellent momentum throughout our operations and across our brands. In 1998, the Internet truly came of age and became even more integral to people's everyday lives. As the industry leader, America Online is better positioned than ever to continue delivering strong profit growth on a consistent, predictable basis." Mr. Case added: "Electronic commerce is changing forever the way businesses sell and consumers buy 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. . We're we're Contraction of we are. we're we are excited about the opportunities presented by our pending combination with Netscape (1) (Netscape Communications Corporation, Mountain View, CA, www.netscape.com) Part of America Online (AOL), Netscape specializes in Web software, including the Netscape Web browser. as well as our alliance with 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. to drive the growth of this new medium and serve new customers and markets in valuable and innovative ways." Bob Pittman Pittman may refer to: People
The officer of a firm responsible for day-to-day management, usually the president or an executive vice-president. , said: "The record increase in its membership base highlights the power of the AOL brand, as well as the growing appeal of our service's convenience and ease-of-use to mainstream consumers. Our CompuServe An online information service that provides access to the Internet, e-mail, instant messaging and an integrated contact list. Founded in 1969 as a timesharing service, CompuServe is one of the oldest online services, being the first to offer e-mail in 1979 and online chat a year later. , 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 Digital City brands - supported by the AOL service infrastructure - made significant progress this quarter and they are poised for more in the coming months. With advertising and commerce revenues more than doubling, mainstream marketers increasingly see the superior value of reaching cyberspace's biggest audience through our brands." Mr. Pittman added: "As we work to ensure a smooth transition of Netscape into our family of brands, we are becoming even more enthusiastic about the potential of this acquisition. When we close the transaction, we'll we'll Contraction of we will. we'll we will or we shall we'll will ~shall be ready to move quickly to build on the initial success of Netcenter An earlier name for Netscape's home page and Web portal. There were so many visitors to Netscape's home page that it was turned into a full-service Web portal, providing Web search, news, white and yellow pages, classified ads, free e-mail and a variety of features. The www.netcenter. and market turnkey See turnkey system. e-commerce e-commerce, commerce conducted over the Internet, most often via the World Wide Web. E-commerce can apply to purchases made through the Web or to business-to-business activities such as inventory transfers. solutions to businesses seeking to join or increase their participation in the Net Economy." The Company said that its pending acquisition of Netscape Communications Corporation (company) Netscape Communications Corporation - (Formlerly "Mosaic Communications Corporation", MCC) A company set up in April 1994 by Dr. James H. Clark and Marc Andreessen <marca@netcom. is expected to close in early spring. 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 include: -- Online Service Revenues: Revenues from subscriptions climbed to $779 million, an increase of 61% over the second quarter of fiscal 1998. -- Advertising and Electronic Commerce Revenues: Revenues from advertising and commerce climbed to $126 million, an increase of 133% over the $54 million in last year's second quarter and 22% above the $103 million recorded during the first quarter. -- Advertising and Electronic Commerce 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. : The Company grew its backlog of advertising and electronic commerce revenues from $598 million on September September: see month. 30, 1998 to $729 million on December 31, 1998. -- Cash Flow from Operations Cash flow from operations A firm's net cash inflow resulting directly from its regular operations (disregarding extraordinary items such as the sale of fixed assets or transaction costs associated with issuing securities), calculated as the sum of net income plus noncash expenses : The Company's cash flow from operations was $208 million, a 193% increase over last year's second quarter. On December 31, 1998, it had cash and cash equivalents of $1.5 billion, up from $521 million on December 31, 1997. -- Operating Margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: : Operating margins improved to 13.6% from 5.4% in the corresponding quarter last year and 12.9% in the September quarter. -- Marketing Expenses: Marketing expenses amounted to 14% of revenues, compared with 16% in the second quarter of fiscal 1998. -- AOL Member Usage: Members increased their average daily usage on the AOL service to 48 minutes during the quarter, up from 41 minutes in the corresponding quarter last year. AOL Service Highlights During the quarter, the service's AOL 4.0 software continued to generate an enthusiastic response from members. It now accounts for more than 70% of all usage -- the fastest adoption rate of any software in AOL history. AOL 4.0 for Macintosh became available for download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. earlier this month and CD-ROMs will be mailed to AOL members who use Apple computers in the coming weeks. Usage of the service continues to grow in the current quarter, last week passing one million simultaneous users. By comparison, the service had just 190,000 simultaneous users when unlimited use pricing became effective on December 1, 1996. In a significant advance in the development of 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). availability, the Company formed a strategic alliance with Bell Atlantic earlier this month to offer Digital Subscriber Line See DSL. (communications, protocol) Digital Subscriber Line - (DSL, or Digital Subscriber Loop, xDSL - see below) A family of digital telecommunications protocols designed to allow high speed data communication over the existing copper telephone lines between end-users and (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 ) access to the AOL service. Bell Atlantic, serving one-quarter of the country, plans to make DSL available in areas covering 7.5 million homes by the end of 1999, a number that Bell Atlantic expects to nearly double to more than 14 million by the end of the year 2000. Under the agreement, America Online will begin this summer to offer Bell Atlantic's Infospeed DSL access as an upgrade for AOL members in Bell Atlantic's service area, as the technology becomes available in major markets. America Online will announce its DSL pricing plan when the roll-out begins this summer, and the DSL upgrade is expected to cost AOL members less than $20 extra per month. During the 1998 holiday shopping season, AOL members spent an estimated $1.2 billion with online retailers available through the service. An estimated one million-plus members shopped online for the first time ever this holiday season. The Company began introducing a new shopping convenience tool, AOL's Quick Checkout, which lets shoppers store key purchase information securely online, including 10 credit card numbers and up to 50 shipping addresses. To provide AOL members with a customized online shopping experience, the Company last quarter acquired PersonaLogic, Inc., a leader in personalized per·son·al·ize tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es 1. To take (a general remark or characterization) in a personal manner. 2. To attribute human or personal qualities to; personify. , interactive consumer buying guides. These guides are convenient and easy-to-use tools that help AOL members make informed decisions by simply describing their preferences on a wide variety of products and services that meet their individual tastes. Since September 30, 1998, the Company has reached major new or expanded advertising and commerce agreements with Bell Atlantic and GTE GTE General Telephone & Electronics GTE Génie Thermique et Énergie (French) GTE Gas Turbine Engine GTE Global Tropospheric Experiment GTE Geothermal Energy GTE Gas Turbine Efficiency plc (Sweden & USA) Directories Corporation, PlanetRx, Inc., Digital Chef, E-Stamp (1) (Electronic-STAMP) One of several terms used to refer to the U.S. Postal Service's IBIP program. See PC Postage. (2) (E-Stamp Corporation) In 1999, E-Stamp was the first PC Postage service approved by the U.S. , Stamps.com (Stamps.com, Los Angeles, CA, www.stamps.com) A PC Postage service that lets you print U.S. postage stamps on your own printer. It was one of the first such services approved by the U.S. , and Tel-Save.com, among others. Building on the successful AOL-CBS relationship to further enhance the member experience, CBS NEWS CBS News is the news division of American television and radio network CBS. Its current president is Sean McManus who is also head of CBS Sports. Current productions Current television shows
adj. Spoken, occurring, or used during broadcasting: an on-air gaffe; changed his on-air name. promotion on CBS NEWS programming. In addition, the Company and Dell Computer Corporation (company) Dell Computer Corporation - One of the biggest US manufacturers of IBM PC compatibles. "From notebooks to networks", their slogan says. http://us.dell.com. announced a multi-year agreement to feature AOL on Dell consumer computers sold in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of . Underscoring the appeal of the AOL brand and the increasing importance that consumers put on the Internet experience in buying personal computers, this is the seventh in a series of key marketing alliances with major personal computer manufacturers, including: Compaq Computer Corporation (company) Compaq Computer Corporation - The largest US manufacturer and vendor of IBM PC compatible personal computers and servers. Compaq was started in 1982 by three ex-Texas Instruments employees. Quarterly sales $2499M, profits $210M (Aug 1994). http://compaq.com/. , Packard Bell NEC (Packard Bell, The Netherlands, www.packardbell.com) A major PC manufacturer that is the consumer brand of NEC Computers International and the home computing market leader in the U.K. and much of Western Europe. , Inc., 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) , Sony SONY Standard Oil of New York (common, but untrue; it's an urban legend) , HP, and Acer Acer trees of the family Aceraceae. Acer rubrum ingestion of wilted or dries leaves of this tree causes acute hemolytic anemia characterized by red urine, jaundice, anemia and methemoglobinemia in horses. America America [for Amerigo Vespucci], the lands of the Western Hemisphere—North America, Central (or Middle) America, and South America. The world map published in 1507 by Martin Waldseemüller is the first known cartographic use of the name. . AOL International Highlights Earlier this month, AOL membership outside of the U.S. passed 2 million, nearly doubling over the last year. Including CompuServe's non-U non-U adj. Chiefly British Not characteristic of the upper class, especially in language usage. [non- + U2. .S. members, AOL International now has a total of over 3 million members. After launching its latest service, AOL in Australia Australia (ôstrāl`yə), smallest continent, between the Indian and Pacific oceans. With the island state of Tasmania to the south, the continent makes up the Commonwealth of Australia, a federal parliamentary state (2005 est. pop. -- a joint venture 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. -- in October October: see month. , AOL International in December announced its joint venture with the Cisneros Group The Cisneros Group of Companies is one of the largest, privately held media, entertainment, telecommunications and consumer products organizations in the world. The Group owns or holds interests in companies ranging from broadcast television, networks and pay television businesses -- one of Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. America's premier media, entertainment and telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. organizations -- to develop and market AOL services for Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . The joint venture first will target Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , Mexico and Argentina. It also will operate the CompuServe brand in Latin America. During the quarter, AOL's joint venture with Bertelsmann in Europe announced a multi-year $13 million agreement to make BOL BOL Bolivia (ISO Country code) BOL Books Online BOL Bole (SIL code, Nigeria) BOL Bill Of Lading BOL Beginning Of Line BOL Best Of Luck BOL Buzz Out Loud BOL Bruin Online BOL Beginning Of Life , Ltd. the exclusive bookseller on the AOL and CompuServe services in Europe. This represents one of the largest Internet commerce and advertising deals in Europe to date and reflects the rapid growth of the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. interactive marketplace. Highlights from CompuServe, ICQ, AOL.COM, and Digital City The Company's interactive brands -- CompuServe, ICQ, AOL.COM, and Digital City -- extended their combined audience reach during the quarter. CompuServe re-launched its Shopping Channel Shopping channels are television specialty channels that present shopping related content, particularly for home shopping enthusiasts. Home shopping pioneers:
CompuServe recently took another step in the development of its professional market solutions through a strategic partnership with WebMD, Inc., a full-service Internet healthcare site. This partnership is designed to deliver best-of-breed dial-up access hot Dial-up access is a form of Internet access via telephone line. The client uses a modem connected to a computer and a telephone line to dial into an Internet service provider's (ISP) node to establish a modem-to-modem link, which is then routed to the Internet. , content and services to physicians and other healthcare professionals, and trusted healthcare information and other services to CompuServe members. In the next several weeks, CompuServe will introduce CompuServe 2000, its new software that will share the AOL 4.0 platform at significant network cost-savings and provide members with an improved e-mail system, cleaner and simpler look, Microsoft Internet Explorer See Internet Explorer. 4.01, five screen names per account, Parental Controls This article is about computer options. For the television show, see Parental Control (TV series). Parental controls are options, typically included in digital television services, computer and video games, or computer software used to access the Internet, that and V.90 access. During the quarter, the Company continued to make significant progress in building ICQ into a major desktop communications portal. ICQ has rolled out its new client in beta to approximately one million users. This client provides users with an advanced search function, enhanced capability to communicate with friends and family via instant messages and real-time 1. real-time - Describes an application which requires a program to respond to stimuli within some small upper limit of response time (typically milli- or microseconds). Process control at a chemical plant is the classic example. chats, as well as the ability to meet new people sharing similar interests, among other features. Since AOL's acquisition of ICQ just six months ago, the total number of ICQ registrants has nearly doubled to more than 25 million. ICQ currently supports 11 million active registrants -- those who have used the service in the last 30 days -- marking a nearly 70% increase since June. Importantly, more than 5.2 million people use the service everyday and, currently, more than 75,000 people are registering daily compared to 50,000 in June. The Company extended its Shopping Channel to AOL.COM, the No. 1 consumer Web site, providing AOL's shopping partners with unique access to cyberspace's largest audience of consumers. Extending the reach of AOL.COM into the business/daytime market, the Company and Lotus Development Corp. will deliver a co-branded suite of offerings to users of Lotus Notes Messaging and groupware software from IBM Lotus that was introduced in 1989 for OS/2 and later expanded to Windows, Mac, Unix, NetWare, AS/400 and S/390. Notes provides e-mail, document sharing, workflow, group discussions and calendaring and scheduling. R5 and Lotus Sametime that include AOL.COM's Web searching capability and My News customized news service. In addition, users of Lotus Sametime Connect will be able to communicate with the millions of AOL Instant Messenger See AIM. users worldwide. Last October, Digital City, the No. 1-branded local content network and community guide, launched on three new platforms including AOL.COM, CompuServe and Netscape Netcenter. Digital City announced a new strategic agreement with The Weather Channel for content for all of Digital City local markets, for on-air television promotions of Digital City on The Weather Channel cable network, and featuring Digital City as the local content provider for weather.com's 6 million monthly users. About America Online, Inc. 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 branded interactive services and content. America Online, Inc. operates two worldwide Internet services: America Online, with more than 15 million members; and CompuServe, with approximately 2 million members. America Online, Inc. also operates AOL Studios, a leading builder of Internet brands for new market segments. Other branded Internet services operated by America Online, Inc. include AOL.COM, the world's most accessed Web site from home; Digital City, Inc., the No. 1 branded local content network and community guide on AOL and the Internet; AOL NetFind, AOL's comprehensive guide to the Internet; AOL Instant Messenger, an instant messaging Exchanging text messages in real time between two or more people logged into a particular instant messaging (IM) service. Instant messaging is more interactive than e-mail because messages are sent immediately, whereas e-mail messages can be queued up in a mail server for seconds or tool available on both AOL and the Internet; and ICQ, an instant communication and chat technology on the Internet. The Company's earnings conference call can be heard live on the Internet via Broadcast.com at 5:00 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. on Wednesday, January 27. To listen to the call via the Internet, visit the Broadcast.com Web site at www.broadcast.com, download the appropriate software, and navigate (1) "Surfing the Web." To move from page to page on the Web. (2) To move through the menu structure in a software application. to the AOL listing. 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; timing and benefits of acquisitions and other alliances; new products, services, content and features; and timing of deployment, availability, pricing and benefits 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: failure of satisfaction of certain closing conditions, including customary regulatory approvals and approval by Netscape's shareholders; 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 provide adequate network capacity; fixed-cost, minimum-commitment nature of network; reliance on network service providers; 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, 1998, the Form 10-Q Form 10-Q See 10-Q. for the quarter ended September 30, 1998 and in the Risk Factors section of the Company's most recently filed registration statement on Form S-3 filed in June 1998. -0-
The following financial statements have been restated to
incorporate the acquisition of PersonaLogic, Inc.
America Online, Inc.
Consolidated Summary of Results
(Amounts in millions, except per share data)
Three months ended
December 31,
-------------------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
Revenues:
Online service revenues $ 779 $ 483
Advertising, commerce and other
revenues 181 109
------------ ------------
Total revenues 960 592
Costs and expenses:
Cost of revenues 590 386
Marketing 132 97
Product development 32 24
General and administrative 62 52
Amortization of goodwill and other
intangible assets 13 2
Settlement charge - (1)
------------ ------------
Total costs and expenses 829 560
Income from operations 131 32
Other income, net 14 1
------------ ------------
Income before provision for
income taxes 145 33
Provision for income taxes (24) -
============ ============
Net income $ 121 $ 33
============ ============
Earnings per share-diluted $ 0.22 $ 0.06
Earnings per share-basic $ 0.26 $ 0.08
Weighted average shares
outstanding-diluted 561 512
Weighted average shares
outstanding-basic 460 413
America Online, Inc.
Consolidated Summary of Results
(Amounts in millions, except per share data)
Six months ended
December 31,
-------------------------------------
1998 1997
------------ ------------
(Unaudited) (Unaudited)
Revenues:
Online service revenues $ 1,494 $ 917
Advertising, commerce and other
revenues 325 197
------------ ------------
Total revenues 1,819 1,114
Costs and expenses:
Cost of revenues 1,136 713
Marketing 237 195
Product development 60 40
General and administrative 118 107
Amortization of goodwill and other
intangible assets 26 4
Restructuring charge - (2)
Settlement charge - (1)
------------ ------------
Total costs and expenses 1,577 1,056
Income from operations 242 58
Other income, net 16 6
------------ ------------
Income before provision for
income taxes 258 64
Provision for income taxes (30) -
============ ============
Net income $ 228 $ 64
============ ============
Earnings per share-diluted $ 0.41 $ 0.13
Earnings per share-basic $ 0.50 $ 0.16
Weighted average shares
outstanding-diluted 556 508
Weighted average shares
outstanding-basic 457 409
America Online, Inc.
Supplemental Information - Earnings per Share Calculation
on a Fully-Taxed Basis
(Amounts in millions, except per share data)
Three months Three months
ended 12/31/98 ended 12/31/97
-------------- --------------
(Unaudited) (Unaudited)
Net income:
-----------
Income before taxes $ 145 $ 33
Deduct:
Assumed tax provision (57) (13)
-------------------------------------
Income net of assumed tax provision $ 88 $ 20
=====================================
Income per share - diluted (1) $ 0.17 $ 0.04
(1) Weighted average shares
outstanding based on
fully taxed diluted share
calculation including
common stock equivalents 529 482
Six months Six months
ended 12/31/98 ended 12/31/97
-----------------------------------
(Unaudited) (Unaudited)
Net income:
-----------
Income before taxes $ 258 $ 64
Deduct:
Assumed tax provision (101) (26)
-------------------------------------
Income net of assumed tax provision $ 157 $ 38
=====================================
Income per share - diluted (1) $ 0.30 $ 0.08
(1) Weighted average shares
outstanding based on
fully taxed diluted share
calculation including
common stock equivalents 524 478
America Online, Inc.
Consolidated Balance Sheets
(Amounts in millions)
December 31, June 30,
1998 1998
-------------- ------------
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 1,452 $ 631
Trade accounts receivable, net 113 105
Other receivables 112 92
Prepaid expenses and other
current assets 105 103
----------- ----------
Total current assets 1,782 931
Property and equipment, net 424 363
Other assets:
Investments including
available-for-sale securities 485 449
Product development costs, net 91 88
Other assets 5 3
Goodwill and other intangible
assets, net 359 381
----------- ----------
Total assets $ 3,146 $ 2,215
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 91 $ 87
Other accrued expenses and
liabilities 453 433
Deferred revenue 309 242
Accrued personnel costs 64 57
Deferred network services credit 76 76
----------- ----------
Total current liabilities 993 895
Long-term liabilities:
Notes payable 400 372
Deferred revenue 53 71
Other liabilities 14 6
Deferred network services
credit 235 273
----------- ----------
Total liabilities 1,695 1,617
Stockholders' equity
Common stock 5 4
Unrealized gain on
available-for-sale securities 128 145
Additional paid-in capital 1,513 872
Accumulated deficit (195) (423)
----------- ---------
Total stockholders' equity 1,451 598
----------- ---------
Total liabilities and
stockholders' equity $ 3,146 $ 2,215
=========== =========
America Online, Inc.
Consolidated Statements of Cash Flows
(Amounts in millions)
Three months ended December 31,
------------------------------------------
1998 1997
------------------ ------------------
(Unaudited) (Unaudited)
Cash flows from
operating activities:
Net income $ 121 $ 33
Adjustments to
reconcile net
income to net
cash provided by operating
activities:
Non-cash restructuring charges - (1)
Amortization of deferred
network services credit (19) -
Depreciation and amortization 55 32
Compensatory stock options 5 3
Deferred income taxes 24 -
Gain on sale of investments (2) (4)
Changes in assets and
liabilities:
Trade accounts receivable (3) (19)
Other receivables 25 (6)
Prepaid expenses and
other current assets (30) 17
Other assets (2) (1)
Investments including
available-for-sale securities (23) 2
Accrued expenses and other
current liabilities 5 7
Deferred revenue and other
liabilities 52 8
------------------ ------------------
Total adjustments 87 38
------------------ ------------------
Net cash provided by operating
activities 208 71
Cash flows from investing activities:
Purchase of property and equipment (65) (107)
Product development costs (11) (14)
Proceeds from sale of investments 1 7
Purchase of available-for-sale
securities (25) (2)
Proceeds from sale of subsidiary 25 -
Other investing activities (4) (3)
------------------ ------------------
Net cash used in investing activities (79) (119)
Cash flows from financing activities:
Proceeds from issuance of
common and preferred
stock, net 44 25
Proceeds from sale and
leaseback of property
and equipment 8 20
Principal and accrued interest
payments on line of credit and
debt (10) (58)
Proceeds from line of credit
and issuance of debt 28 350
Restricted cash - 50
------------------ ------------------
Net cash provided by
financing activities 70 387
------------------ ------------------
Net increase in cash and
cash equivalents 199 339
Cash and cash equivalents
at beginning of period 1,253 182
------------------ ------------------
Cash and cash equivalents
at end of period $ 1,452 $ 521
------------------ ------------------
------------------ ------------------
Supplemental cash flow information
Cash paid during the period for:
Interest 8 1
Six months ended December 31,
------------------------------------------
1998 1997
------------------ -----------------
(Unaudited) (Unaudited)
Cash flows from
operating activities:
Net income $ 228 $ 64
Adjustments to
reconcile net
income to net
cash provided by operating
activities:
Non-cash restructuring charges - (2)
Amortization of deferred
network services credit (38) -
Depreciation and amortization 105 57
Compensatory stock options 7 24
Deferred income taxes 30 -
Gain on sale of investments (2) (8)
Changes in assets and
liabilities:
Trade accounts receivable (9) (22)
Other receivables (19) -
Prepaid expenses and
other current assets (29) 26
Other assets (1) (3)
Investments including
available-for-sale securities (19) (16)
Accrued expenses and other
current liabilities 33 30
Deferred revenue and other
liabilities 57 2
------------------ -----------------
Total adjustments 115 88
------------------ -----------------
Net cash provided by operating
activities 343 152
Cash flows from investing activities:
Purchase of property and equipment (110) (169)
Product development costs (21) (27)
Proceeds from sale of investments 1 7
Purchase of available-for-sale
securities (45) (5)
Proceeds from sale of subsidiary 25 -
Other investing activities (17) (7)
------------------ -----------------
Net cash used in investing activities (167) (201)
Cash flows from financing activities:
Proceeds from issuance of
common and preferred
stock, net 619 50
Proceeds from sale and
leaseback of property
and equipment 8 20
Principal and accrued interest
payments on line of credit and
debt (10) (58)
Proceeds from line of credit
and issuance of debt 28 379
Restricted cash - 50
------------------ -----------------
Net cash provided by
financing activities 645 441
------------------ -----------------
Net increase in cash and
cash equivalents 821 392
Cash and cash equivalents
at beginning of period 631 129
------------------ -----------------
Cash and cash equivalents
at end of period $ 1,452 $ 521
------------------ -----------------
------------------ -----------------
Supplemental cash flow information
Cash paid during the period for:
Interest 8 2
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