SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): September 28, 1998
AMERICA ONLINE, INC.
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(Exact Name of Registrant as Specified in Charter)
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Delaware 0-19836 54-1322110
(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
22000 AOL Way, Dulles, Virginia 20166
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (703) 448-8700
Item 5. Other Events.
On September 28, 1998, America Online, Inc. ("AOL") issued a press
release announcing fiscal year 1998 fourth quarter net income of $7.1 million or
$0.03 per fully diluted share and full year net income of $91.8 million or $0.35
per fully diluted share, among other results. A copy of the press release is
attached hereto as Exhibit 99.1 and incorporated herein by reference. In
conjunction with this press release, the Company held a telephone conference
with analysts and others, in the course of which the Company stated that it was
comfortable with analysts' current consensus earnings estimates for the first
quarter of fiscal year 1999 and for fiscal year 1999. Such statement was made in
the context of discussions regarding one-time non-cash charges for acquired
research and development in connection with the acquisition of the assets of
Mirabilis Ltd., including its ICQ instant communication and chat technology, and
the acquisition of NetChannel, Inc., and in the context of responses to
questions presented during the conference call.
This statement is a forward-looking statement within the meaning of the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995,
and is based on management's current expectations or beliefs and is subject to a
number of factors and uncertainties that could cause actual results to differ
materially. The following factors, among others, could cause actual results to
differ materially from those referred to in the forward-looking statement:
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; slowing or reversing subscriber and/or revenue
growth, requiring the Company to increase marketing spending and causing
decreased margins; inability to establish and maintain relationships with
commerce, advertising, marketing, technology and content providers; risk of
accepting warrants in certain agreements; inability to identify, develop and
achieve commercial success for new products and services and access and
distribution technologies; 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 section of the Company's Form 10-K for the
fiscal year ended June 30, 1998.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits.
99.1 Press Release Dated September 28, 1998 By America Online,
Inc. Announcing Fiscal 1998 Fourth Quarter Net Income of
$7.1 Million or $0.03 Per Fully Diluted Share
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
AMERICA ONLINE, INC.
Date: September 29, 1998 By:/s/J. Michael Kelly
J. Michael Kelly
Senior Vice President, Chief Financial
Officer, Chief Accounting Officer,
Treasurer and Assistant Secretary
EXHIBIT INDEX
Exhibit
Number Description
99.1 Press Release Dated September 28, 1998 By America Online, Inc. Announcing
Fiscal 1998 Fourth Quarter Net Income of $7.1 Million or $0.03 Per Fully
Diluted Share
AMERICA ONLINE, INC. REPORTS FISCAL 1998 FOURTH QUARTER
NET INCOME OF $7.1 MILLION OR $0.03 PER FULLY DILUTED SHARE
Full Year Net Income of $91.8 Million or $0.35 per Fully Diluted Share
Before One-Time Charges of $88.2 Million and Fully Taxed,
Fourth Quarter Net Income Climbs to $57.3 Million or $0.23 per Share and
Full Year Net Income Rises to $134 Million or $0.55 Per Share
DULLES, VA, September 28, 1998 -- America Online, Inc. (NYSE: AOL) today
reported fiscal 1998 fourth quarter net income of $7.1 million or $0.03 per
fully diluted share and full year net income of $91.8 million or $0.35 per fully
diluted share. This compares to a net loss of $11.8 million, or $0.06 per share
in last year's fourth quarter, and fiscal 1997's net loss of $499.3 million or
$2.61 per share.
The Company reported its operating results for the fiscal 1998 fourth quarter
and full year on August 4, 1998. The Company's fiscal 1998 net income reported
today reflects one-time charges taken in the fourth quarter, which the Company
said have no effect on the previously announced operating results.
Fourth quarter net income, before special charges and on a fully taxed basis,
climbed to $57.3 million or $0.23 per fully diluted share, on revenues of $792.3
million. These earnings represent a tenfold increase on a comparable basis over
the Company's earnings for the fiscal 1997 fourth quarter.
The full year's net income, before special charges and on a fully taxed basis,
rose to $134.0 million or $0.55 per fully diluted share on revenues of $2.6
billion. That compares to a fiscal 1997 net loss of $13.4 million or $0.07 per
share on revenues of $1.7 billion.
The Company also reported fourth quarter non-cash charges for acquired research
and development of $60.5 million in connection with its acquisition of the
assets of Mirabilis Limited, including its ICQ instant communication and chat
technology, and of $10.0 million in connection with its acquisition of
NetChannel, Inc. In addition, during the same quarter, the Company took a $17.7
million charge in connection with a previously announced legal settlement.
"Our fiscal 1998 operating results reflect our strong momentum as the leading
interactive services company," said Steve Case, Chairman and Chief Executive
Officer. "America Online is firing on all cylinders, and we look forward to
continuing to strengthen our unique position in the fastest-growing industry in
the world."
Bob Pittman, President and Chief Operating Officer, said: "In this first quarter
of our 1999 fiscal year, we are continuing to build aggressively on last year's
extremely successful performance with strong membership growth, a steady stream
of significant advertising and commerce partnerships, major enhancements to our
industry-leading value proposition, and tightly controlled costs."
Mr. Pittman added: "Starting today, we are mailing millions of CD-ROMs to
members and potential customers for easy installation of AOL 4.0. We also are
preparing for our biggest ever AOL Holiday Shopping campaign, the launch of our
redesigned AOL.COM, and the introduction of 'You've Got Pictures!'."
The Company's operating highlights for fiscal 1998 include:
** Membership: Over fiscal 1998, AOL membership climbed 3.9 million, compared to
2.4 million in 1997. The AOL service reached a total of 12.5 million members
worldwide on June 30, 1998. The CompuServe acquisition was completed in the
fiscal 1998 third quarter and the service ended the year with approximately 2
million members.
** Service Revenues: AOL service revenues climbed to nearly $2.2 billion for
fiscal 1998, a 51% increase over the prior year, reflecting growing membership
and higher revenue per member.
** Other Revenues: Advertising, commerce and other revenues rose to $439.0
million for fiscal 1998, compared to $255.8 million during the prior year.
During the year, advertising and commerce fees amounted to $253.9 million, a
160% increase over fiscal 1997.
** Advertising and Commerce Backlog: AOL increased its backlog of advertising
and commerce contract revenues from $180.0 million at the end of fiscal 1997 to
$510.5 million at June 30, 1998.
** Marketing Spending: Marketing expenses were held to just 14.4% of revenues
during fiscal 1998, compared to 25.0% during the prior year.
** Operating Cash Flow: The Company generated approximately $410.5 million in
operating cash flow during the year and today has cash and cash equivalents in
excess of $1 billion, up from $124.3 million at June 30, 1997.
* * * *
America Online, Inc., based in Dulles, Virginia, is the world's leader in
branded interactive services and content. America Online, Inc. operates two
worldwide Internet online services: America Online, with 13 million members; and
CompuServe, with approximately 2 million members. America Online, Inc. also
operates AOL Studios, the world's leading creator of original interactive
content. 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 #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 tool available on both AOL and the Internet; and
ICQ, an instant communication and chat technology on the Internet.
* * * *
This release contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such
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 results; subscriber growth; growth of advertising and commerce
relationships; marketing campaigns; and timing for launch of new products and
services.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: 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; slowing or reversing subscriber and/or revenue growth, requiring the
Company to increase marketing spending and causing decreased margins; inability
to establish and maintain relationships with commerce, advertising, marketing,
technology and content providers; risk of accepting warrants in certain
agreements; inability to identify, develop and achieve commercial success for
new products and services and access and distribution technologies; 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 section of the Company's Form 10-K for the fiscal year ended June 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.
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