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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Keith J who wrote (7922)	2/15/1998 5:06:00 PM
From: Todd Daniels	Respond to of 13594

AOL EBITDA AND FREE CASH FLOW TABLES......... - Working Capital declined 24% vs ($140m vs $184m) - EBIDTA Cash Flow declined 30% to $0.46/share (Excluding one time $17mil-$0.14/share Network Accrual Adjustment Credit for periods prior to Q1[sep]98) AOL stock at $110 is 63 times that amount annualized. Disney paid 14 x EBITDA for Cap Cities/ABC; MSFT 8.7 x for $1b investment in CMCSA NOTE: EBITDA, of course, is not the same as the $75mil "funds from operations" shown on the accounting Cash Flow Statement - Normal operating FREE Cash Flow declined from positive $108mil to minus $89mil (FCF is considered better measure of ability to grow a business) This especially highlights that much of the price hike will go to catch-up. AOL FY98 (millions) Q1 Q2 [Sep97] [Dec97] EBITDA Cash Flow (EBITDA) $ 72* 55* FREE Cash Flow Operating Net 19 21 One Time Network Accrual Credit -- (17) Deprec/Amort 25 31 Change in Working Capital 137 (44) Capital Expenses ( 66) (88) Other income/exp (net) 8+ 1 Change In LT Deferred Revenue ( 6) ( 7) Chg In Deferred Taxes 12 14 = FREE CASH FLOW $129 (89) Wght avg shs (fully diluted) 119 120 Multiple of Annualized Q2 to current $110/share price Normal Operating EBITDA/SHARE $0.60 $0.46 49 x FREE CASH FLOW/SHARE $1.08 ($0.74) NM * excludes: . $1mil Q1 $1mil Q2 credits from reserve for Q297 restructuring charge . $17mil Q2 credit from adjustment of network accruals for periods prior to Q1[sep]98 (reported by AOL in Q2 conference call) "adjusted network access accruals for the December quarter resulting in an aggregate pre-tax benefit of $17 million, which related to periods prior to September 30, 1997." . $3.5mil (Q2) and $20.0mil (Q1) expense for compensatory stock options re. sale of ANS + $3mil Gain from sale of XCIT recorded by AOL above the line (Other Revenue) excluded from EBITDA, included in Other Income/Exp. Re exclusion of "compensatory options" expense incurred in conjunction with sale of ANS to WorldCom, worth noting is that this largely is just acceleration of options-related expense that would have been incurred over longer period if ANS remained part of AOL.