America Online

Consolidated Income Statement 000's $

1993 1993 (%) 1994
Revenue: -
Online Services 38,462.00 73.99 100,993.00

Other Revenue 13,522.00 26.01 14,729.00

Total Revenue 51,984.00 100.00 115,722.00

Cost and Expenses: -

Cost of Revenues 28,820.00 55.44 69,043.00
Marketing 9,745.00 18.75 23,548.00
Product Development 2,913.00 5.60 4,961.00
General and Administrative 8,581.00 16.51 13,562.00
Acquired R & D - - -
Amortisation of Goodwill - - -
Total Cost 50,059.00 96.30 111,114.00

Operating Income 1,925.00 3.70 4,608.00

Other Income 371.00 0.71 1,774.00

Merger Expenses - - -
PBT before extra ordinary items 2,296.00 4.42 6,382.00
Provision for Tax 1,897.00 3.65 3,832.00
PAT 399.00 0.77 2,550.00
Extra ordinary item 1,133.00 2.18 -
Earnings for ESH 1,532.00 2.95 2,550.00
No of Shares 29,286.00 34,208.00
EPS- Before Extra Ordinary Items 0.01 0.07
EPS- Diluted 0.05 0.07
000's $ Projected
1994 (%) 1995 1995 (%) 1996 1997

87.27 358,498.00 90.92 406,296.54 460,468.06

12.73 35,792.00 9.08 40,564.15 45,972.57

100.00 394,290.00 100.00 446,860.69 506,440.62

59.66 229,724.00 58.26 260,353.10 295,065.98

20.35 77,064.00 19.55 87,338.94 98,983.84
4.29 12,842.00 3.26 14,554.22 16,494.74
11.72 41,966.00 10.64 47,561.33 53,902.68
- 50,335.00 12.77 - -
- 1,653.00 0.42 5,435.60 5,435.60
96.02 413,584.00 104.89 415,243.19 469,882.84

3.98 -19,294.00 -4.89 31,617.49 36,557.78

1.53 3,023.00 0.77 3,426.06 3,882.85

- 2,207.00 0.56 - -
5.51 -18,478.00 -4.69 35,043.55 40,440.63
3.31 15,169.00 3.85 11,914.81 13,749.82
2.20 -33,647.00 -8.53 23,128.74 26,690.82
- - - - -
2.20 -33,647.00 -8.53 23,128.74 26,690.82
33,986.00 33,986.00 33,986.00
-0.99 0.68 0.79
-0.99 0.68 0.79
Basis * Do not account the impact of forecasting

Increase in revenue/ subscriber from $15 to

$17.1 i.e. 13.33%
Expected to have same proportion as earlier

% of Sales of 1995
% of Sales of 1995
% of Sales of 1995
% of Sales of 1995
Non recurring- cannot be forecasted
Non recurring- cannot be forecasted

% of Sales of 1995
Non recurring- cannot be forecasted

34% of PBT given in case

Assuming same
f forecasting
America Online

Consolidated Balance Sheet 000's $

1994 1994 (%) 1995 1995 (%)
Assets
Current assets
Cash and cash equivalents 43,891.00 28.39 45,378.00 11.16
Short Term Investments 24,052.00 15.56 18,672.00 4.59
Trade Accounts Receivable 8,547.00 5.53 32,176.00 7.92
Other Accounts Receivable 2,036.00 1.32 11,103.00 2.73
Prepaid Expenses and other current assets 5,753.00 3.72 25,527.00 6.28
Total current assets 84,279.00 54.52 132,856.00 32.69
Property, plant and equipment ,net 20,306.00 13.14 70,466.00 17.34
Other Assets
Product Development Cost net 7,912.00 5.12 18,914.00 4.65
Deferred Subscription Cost net 26,392.00 17.07 77,229.00 19.00
License Rights net 53.00 0.03 5,537.00 1.36
Other Assets 2,800.00 1.81 11,479.00 2.82
Deferred Income Taxes 12,842.00 8.31 35,627.00 8.77
Goodwill net - - 54,356.00 13.37
Additional Investments required
Total assets 154,584.00 100.00 406,464.00 100.00

Liabilities and shareholders equity

Current liabilities
Line of Credit 1,690.00 1.09 484.00 0.12
Current Portion of LTD 597.00 0.39 1,830.00 0.45
Trade payables 15,642.00 10.12 84,639.00 20.82
Accrued Personnel Costs 896.00 0.58 2,829.00 0.70
Deferred Revenue 4,488.00 2.90 20,021.00 4.93
Other accrued expenses and liabilities 13,076.00 8.46 23,509.00 5.78
Total current liabilities 36,389.00 23.54 133,312.00 32.80
Notes Payable 5,836.00 3.78 17,369.00 4.27
Capital Lease Obligations 1,179.00 0.76 2,127.00 0.52
Deferred Income Tax 12,842.00 8.31 35,627.00 8.77
Deferred Rent 41.00 0.03 85.00 0.02
Total Liabilities 19,898.00 12.87 55,208.00 13.58

Stockholder's equity
Preferred Stock $0.01 Par value - - - -
Common Stock $0.01 Par value 308.00 0.20 375.00 0.09
Additional Paid in capital 98,836.00 63.94 251,539.00 61.88
Accumulated Gains and losses -847.00 -0.55 -33,970.00 -8.36
Total stockholder's equity 98,297.00 63.59 217,944.00 53.62
Total liabilities and stockholder's equity 154,584.00 100.00 406,464.00 100.00

Surplus / (Deficit) - - - -
Additional Investments required
 Projected
1996 1997 Basis

51,428.25 58,285.18 % of Sales of 1995

21,161.54 23,983.01 % of Sales of 1995
36,466.03 41,328.04 No of receivable days of 1995 30
12,583.36 14,261.10 No of receivable days of 1995 10
28,930.51 32,787.82 % of Sales of 1995
150,569.69 170,645.15
79,861.23 90,509.13 Turnover Ratio of 1995 5.60

17,022.60 15,131.20 Amortised @10% p.a as per 1995

25,743.00 - Amortised over 18 months
4,491.00 3,445.00 Amortised as per last year (1947-901)
13,009.50 14,744.05 Turnover Ratio of 1995 34.35
35,627.00 35,627.00 Cannot Forecast thus same
48,920.40 43,484.80 Amortised over 10 years given
66,460.15 113,742.21
441,704.57 487,328.54

- - Not required due to surplus funds

415.00 429.00 Given in the case
95,923.92 108,713.45 No of payable days of 1995 134
3,206.19 3,633.67 % of General and Admin cost of 1995
22,690.40 25,715.71 % of Sales of 1995
23,603.31 26,709.15 % of Total Expenses of 1995
145,838.82 165,200.98
16,954.00 16,525.00 Opening balance - Current Portion
2,127.00 2,127.00 Assumed to be same
35,627.00 35,627.00 Cannot Forecast thus same
85.00 85.00 Assumed to be same
54,793.00 54,364.00

375.00 375.00 Assumed to be same

251,539.00 251,539.00 Assumed to be same
-10,841.26 15,849.56 Opening Balance + Current Profit
241,072.74 267,763.56
441,704.56 487,328.54

-0.00 -0.00
66,460.15 113,742.21
America Online

Ratios
000's $
Particulars 1994 1995
Total Assets 154,584.00 406,464.00
Fixed Assets 70,305.00 273,608.00
Trade Receivables 10,583.00 43,279.00
Accounts Payable 15,642.00 84,639.00
Current Assets 84,279.00 132,856.00
Current Liabilities 36,389.00 133,312.00
Equity 98,297.00 217,944.00
Net Sales 115,722.00 394,290.00
Cost of Goods Sold 111,114.00 413,584.00
Number of Days in Year (assumed) 365 365
Earnings for ESH 2,550.00 -33,647.00
Long term Debt 5,836.00 17,369.00

Calculation of Ratios
1 Asset Turnover Ratio (times) 0.75 0.97
2 Receivable Turnover Ratio (times) 10.93 9.11
3 Average Collection period (days) 33.38 40.06
4 Payable Turnover Ratio (times) 7.10 4.89
5 Average Payment period (days) 51.38 74.70
6 Fixed Asset Turnover Ratio (times) 1.65 1.44
7 Debt Equity 0.06 0.08
8 Return on Equity 0.03 -0.15
9 Return on Assets 0.02 -0.08
10 Current Ratio 2.32 1.00

DuPont Analysis in %
Net Profit Ratio 2.20 -8.53
Asset Turnover Ratio 0.75 0.97
Equity Multipler 1.57 1.86

Therefore, Return on Equity % 2.59 -15.44

America Online

Calculation of FCFF and FCFE

Particulars 1996 1997

PAT 23,128.74 26,690.82
Depreciation 24,249.86 27,483.10
Amortisation 54,423.40 28,680.40
Amortisation of Goodwill 5,435.60 5,435.60
Capex 33,645.09 38,130.99
Changes in WC 5,145.87 5,873.16
Repayment of Principal 415.00 429.00
New Debt Issue - -
Interest
FCFE 68,031.64 43,856.76
FCFF 68,446.64 44,285.76
Basis

As a % of last year of Gross Property 23.29%

Difference between PY and CY of Intangible assets
Given in Income Statements
Difference between PY and CY of Property + Depre
CA - CL excluding Current Portion and Line of Credit
Given in Balance Sheet
Not applicable
Cannot be determined