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September 28, 1998

AOL REVEALS Q4 CHARGES FOR ACQUISITIONS & LAWSUIT

By CBR Staff Writer

America Online Inc has now finalized the charges that were omitted from its fourth quarter and year-end results issued in early August (05/08/98). At the time, the company said it was in discussions with the Securities and Exchange Commission about in-process research and development charges associated with its acquisitions of Mirabilis Ltd and NetChannel Inc, plus a charge for the settlement of subscriber lawsuits. The Dulles, Virginia company said the last of those would be between $17m and $ 18m, and so it proved; it was $17.7m. It did not give ranges for the other two charges in August, but as it now says they will have no affect on the previously announced results, the $60.5m charge for the Mirabilis acquisition and the $10.0m charge for NetChannel were obviously what it expected. But, if you believe in reporting net income after charges, rather than before, as we do, then of course it does affect the previously reported results. AOL’s fourth quarter net income is now $7.1m, or three cents per share, after acquired research and development charges totaling $70.5m and a settlement charge of $17.7m, against losses last time of $11.8m,which included a $24.5m contract termination charge. Revenue for the quarter rose 67% to $792.3m. For the year to June 30, net income now reads $91.8m, or 35 cents per share after restructuring charges of $33.8m, acquired research and development charges totaling $80.2m and a settlement charge of $16.6m, against losses last time of $499.3m, which included restructuring charges of $48.6m, the $24.5m contract termination charge and settlement charges of $24.2m. Revenues for the year rose 54.3% to $2.60bn. AOL paid $287m for Mirabilis, the Israeli company with the ICQ instant messaging techno logy, while NetChannel is the failed rival to Microsoft Corp’s WebTV Networks that cost AOL $20m. AOL’s shares closed up $2.875 at $117.625.

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