America Online Inc reported fourth-quarter and year-end results Tuesday that yielded no bottom line figures due to the fact that previously announced one-time charges are still in the process of being finalized. The internet services giant reported operating results for the quarter that would bear out the fact that business is going well, with income before the charges of $57.3m, or the equivalent of $0.23 per share – safely above Wall Street’s consensus estimate of $0.19. Revenue for the quarter rose 67% to $792.3m. With the issue of in-process research and development charges currently under greater scrutiny by the Securities and Exchange Commission, AOL said it is still in discussions with the SEC to finalize charges associated with its acquisitions of Mirabilis Ltd and NetChannel Inc. There will also be a charge from the settlement of subscriber lawsuits last year which should amount to between $17 and $18m. The company would not offer even a ball park figure or a worst-case scenario on the larger charges, though. For the full year, income before special charges was $134m, or $0.55 per share, on revenue up 54% at $2.6bn, compared to a net loss of $13.4m last year. AOL claimed 665,000 new members in the fourth-quarter, a record growth rate despite the recent $2 increase for unlimited monthly access. For the year, membership rose from 8.6 million to 12.5 million. Service revenues for the quarter climbed 73% to $667.5m, while advertising and commerce and revenue jumped 87% to $83.1m. The company said it finished the quarter with a backlog of commerce and advertising contract revenue of $510.5m. Operating margins improved in the quarter to 11.3%, up from a dire 1.6% in the year-ago quarter. Another boost was the fact that marketing spending was cut to 12% of revenues, compared to 21% a year ago. That will change in the first quarter though with a massive CD- ROM mailing and promotional campaign to launch AOL 4.0, although the company promises that it should be able to keep spending at around the 14% level despite the launch. AOL also said that its CompuServe unit is now operating at a near break-even level. Although balance sheet data was unavailable, AOL appears to have improved drastically in an area that has long been a major sore spot, boasting of just over $1bn in cash at the end of the quarter – compared to just $124.3m a year ago. Looking ahead, AOL said it was very comfortable with Wall Street expectations for 1999, which call for profits of $0.91.
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