DIGITAL RIVER INC /DE

CIK:0001062530|SEC Filings

DISCONTINUED OPERATIONS AND DISPOSALS

9 Months Ended

Sep. 30, 2014

DISCONTINUED OPERATIONS AND DISPOSALS

11. DISCONTINUED OPERATIONS

On September 30, 2013, we sold CustomCD, Inc., which was based in Portland, Oregon in a stock sale to a former employee. On October 1, 2013, we sold Digital River Education Services, Inc., which was based in Plano, Texas in a stock sale to two former employees. The results of operations of these entities, including the income (losses) on their respective sales, have been excluded from the results of continuing operations and are reported as discontinued operations. We do not allocate interest income or interest expense to discontinued operations. The operating results of the discontinued operations included in our Consolidated Statements of Operations, including adjustments to loss on the respective sales, for the three and nine months ended September 30, 2014 and 2013, were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2014		2013		2014		2013
Revenue	$	-	$	3,064	$	-	$	8,044
Income (loss) on discontinued operations before taxes and loss on sales		-		(99)		-		(1,619)
Income (loss) on disposal of discontinued businesses before taxes		41		(2,110)		317		(2,110)
Provision (benefit) for income taxes		(102)		2,682		-		2,509
Income (loss) on discontinued operations, net of tax	$	143	$	(4,891)	$	317	$	(6,238)

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
OPERATING ACTIVITIES
Net income (loss)	$ (8,664)	$ (24,724)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Loss (gain) on disposal of discontinued operations	(317)	2,110
Amortization of acquisition-related intangibles	6,395	6,360
Provision for doubtful accounts	599	1,400
Depreciation and amortization	19,469	15,831
Impairment of goodwill		21,249
Debt issuance cost amortization	730	1,278
Amortization of investment premiums	1,111	2,246
Loss (gain) on disposal of equipment	(358)	121
Gain on sale of investment	(2,209)	(17,526)
Loss on extinguishment of debt	5,605
Stock-based compensation expense	13,239	16,295
Deferred and other income taxes	120	1,715
Change in operating assets and liabilities, net of acquisitions:
Accounts receivable	3,600	(2,856)
Prepaid and other assets	380	5,940
Accounts payable	(12,816)	(65,721)
Deferred revenue	(2,735)	(4,321)
Income tax payable	(9,630)	(2,151)
Other current liabilities	(6,320)	(2,801)
Net cash provided by (used in) operating activities	8,199	(45,555)
INVESTING ACTIVITIES
Purchases of investments	(185,180)	(53,243)
Sales of investments	151,834	90,891
Cash received (paid) for cost method investments	1,551	39,636
Cash paid for acquisitions, net of cash received		(55,843)
Proceeds from sale of equipment	532	20
Purchases of equipment and capitalized software	(13,612)	(15,662)
Net cash provided by (used in) investing activities	(44,875)	5,799
FINANCING ACTIVITIES
Repurchase of senior convertible notes	(173,298)	(5,354)
Exercise of stock options		1,273
Sales of common stock under employee stock purchase plan	1,015	1,183
Repurchase of common stock	(28,260)	(43,950)
Repurchase of restricted stock to satisfy tax withholding obligation	(4,124)	(4,328)
Net cash provided by (used in) financing activities	(204,667)	(51,176)
EFFECT OF EXCHANGE RATE CHANGES ON CASH	(9,120)	6,143
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(250,463)	(84,789)
CASH AND CASH EQUIVALENTS, beginning of period	483,868	542,851
CASH AND CASH EQUIVALENTS, end of period	233,405	458,062
SUPPLEMENTAL DISCLOSURES
Cash paid for interest on senior convertible notes	2,509	3,123
Cash paid for income taxes	$ 3,663	$ 3,373

CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
CURRENT ASSETS
Cash and cash equivalents	$ 233,405	$ 483,868
Short-term investments	152,424	115,652
Accounts receivable, net of allowance of $3,062 and $3,206	64,667	70,865
Deferred tax assets	1,455	1,479
Prepaid expenses and other	24,916	27,878
Total current assets	476,867	699,742
Property and equipment, net	47,386	53,770
Goodwill	133,638	139,318
Intangible assets, net	21,565	29,217
Long-term investments	52,965	56,023
Deferred income taxes	1,078	1,037
Other assets	879	2,067
TOTAL ASSETS	734,378	981,174
CURRENT LIABILITIES
Accounts payable	168,010	187,635
Accrued payroll	15,468	20,058
Deferred revenue	4,522	6,904
Other current liabilities	42,169	55,899
Total current liabilities	230,169	270,496
NON-CURRENT LIABILITIES
Senior convertible notes	135,180	295,795
Other liabilities	12,454	21,452
Total non-current liabilities	147,634	317,247
TOTAL LIABILITIES	377,803	587,743
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value; 5,000,000 shares authorized; no shares issued or outstanding
Common stock, $.01 par value; 120,000,000 shares authorized; 50,709,661 and 50,074,977 shares issued	507	501
Treasury stock at cost; 18,821,640 and 16,910,883 shares	(456,696)	(424,416)
Additional paid-in capital	775,704	761,560
Retained earnings	42,590	51,254
Accumulated other comprehensive income (loss)	(5,530)	4,532
Total stockholders' equity	356,575	393,431
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 734,378	$ 981,174