CONVERSANT, INC.

CIK:0001080034|SEC Filings

DISCONTINUED OPERATIONS

9 Months Ended

Sep. 30, 2014

Discontinued Operations and Disposal Groups [Abstract]

On January 10, 2014, the Company completed the disposition of its Owned & Operated Websites segment. The proceeds from the sale consisted of gross cash consideration of $80.0 million, and $74.8 million net of cash divested. The company incurred $2.0 million in transaction costs in connection with the divestiture. The divestiture generated a pre-tax gain of $7.0 million in the first quarter of 2014, which includes a $1.4 million reclassification adjustment relating to the foreign currency translation amounts previously included in other comprehensive income, and a $34.2 million gain net of income taxes due to a tax benefit of $27.2 million realized upon the sale due primarily to tax deductible goodwill. In the second quarter of 2014, the Company recorded an additional $1.3 million pre-tax gain, and $0.7 million gain net of income taxes, as a result of working capital adjustments defined in the sale agreement.

The assets and liabilities of the Owned & Operated Websites segment were classified as held for sale as of December 31, 2013, and the historical results of operations of the Owned & Operated Websites segment are treated as discontinued operations herein. The Company determined that its Owned & Operated Websites segment met the definition of an asset held for sale in the third quarter of 2013.

The following amounts related to the Owned & Operated Websites segment for the three- and nine-month periods ended September 30, 2013, were derived from historical financial information. All amounts have been segregated from continuing operations and reported in discontinued operations (in thousands):



	Three Months Ended September 30, 2013			Nine Months Ended September 30, 2013
Revenue	$	28,872		$	91,489

Income from discontinued operations before income taxes	$	3,805		$	13,016
Income tax expense	7,908			10,857
Net income from discontinued operations	$	(4,103	)	$	2,159

The components of assets and liabilities held for sale at December 31, 2013 are as follows (in thousands):



	December 31, 2013
Current assets held for sale:
Cash and cash equivalents	$	14,933
Receivables, net	15,113
Other current assets	2,756
	$	32,802
Assets held for sale, less current portion:
Property and equipment, net	$	1,554
Goodwill	45,878
Intangible assets acquired in business combinations	7,798
Other assets	412
	$	55,642
Current liabilities related to assets held for sale:
Accounts payable and accrued expenses	$	7,242
Other current liabilities	404
	$	7,646
Liabilities related to assets held for sale, less current portion:
Deferred tax liabilities	$	1,058
Other non-current liabilities	—
	$	1,058

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net income	$ 82,009	$ 56,149
Adjustments to reconcile net income to net cash provided by operating activities:
Loss on note receivable	0	22,556
Depreciation and amortization	28,564	29,086
Non-cash, stock-based compensation	15,076	14,950
Provision for doubtful accounts and sales credits	2,093	2,718
Gain on sale of business, net of tax	(34,895)	(2,286)
Amortization of discount on note receivable	0	(570)
Deferred income taxes	(5,226)	10,398
Tax benefit from stock-based awards	3,424	4,056
Excess tax benefit from stock-based awards	(4,133)	(4,216)
Changes in operating assets and liabilities, excluding business acquisitions	23,222	(18,382)
Net cash provided by operating activities	110,134	114,459
Cash flows from investing activities:
Purchases of property and equipment	(9,953)	(12,203)
Principal payments received on note receivable	0	7,460
Proceeds from the sale of business, net of cash divested	72,813	0
Payments for acquisitions, net of cash acquired	(24,286)	0
Net cash (used in) provided by investing activities	38,574	(4,743)
Cash flows from financing activities:
Proceeds from borrowings under credit agreement	205,000	155,799
Repayments under credit agreement	(290,000)	(105,000)
Repurchases and retirement of common stock	(100,003)	(223,824)
Proceeds from shares issued under employee stock programs	6,577	8,479
Excess tax benefit from stock-based awards	4,133	4,216
Net cash used in financing activities	(174,293)	(160,330)
Effect of exchange rate changes on cash and cash equivalents	(4,616)	1,031
Effect on cash and cash equivalents from discontinued operations	14,933	3,702
Net (decrease) increase in cash and cash equivalents	(15,268)	(45,881)
Cash and cash equivalents, beginning of period	81,319	100,403
Cash and cash equivalents, end of period	$ 66,051	$ 54,522

CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2014	Dec. 31, 2013
CURRENT ASSETS:
Cash and cash equivalents	$ 66,051	$ 81,319
Accounts receivable, net	132,838	148,738
Prepaid expenses and other current assets	9,023	9,897
Income taxes receivable	26,228	7,057
Deferred tax assets, current portion	6,056	1,556
Current assets held for sale	0	32,802
Total current assets	240,196	281,369
Assets held for sale, less current portion	0	55,642
Property and equipment, net	27,421	28,006
Goodwill	402,254	388,922
Intangible assets acquired in business combinations, net	39,586	48,501
Deferred tax assets, less current portion	331	12,422
Other assets	2,027	2,913
TOTAL ASSETS	711,815	817,775
CURRENT LIABILITIES:
Accounts payable and accrued expenses	108,015	126,472
Other current liabilities	6,691	4,057
Liabilities related to assets held for sale	0	7,646
Total current liabilities	114,706	138,175
Income taxes payable, less current portion	23,342	24,050
Deferred tax liabilities, less current portion	4,818	855
Borrowings under credit agreement	55,000	140,000
Other non-current liabilities	9,372	8,740
Liabilities related to assets held for sale, less current portion	0	1,058
TOTAL LIABILITIES	207,238	312,878
Commitments and contingencies (Note 10)
STOCKHOLDERS' EQUITY:
Convertible preferred stock, $0.001 par value; 20,000,000 shares authorized; no shares issued or outstanding at September 30, 2014 and December 31, 2013	0	0
Common stock, $0.001 par value; 500,000,000 shares authorized; 64,344,772 and 66,828,670 shares issued and outstanding at September 30, 2014 and December 31, 2013, respectively	64	67
Additional paid-in capital	458,414	461,822
Accumulated other comprehensive loss	(10,125)	(2,722)
Retained earnings	56,224	45,730
Total stockholders' equity	504,577	504,897
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 711,815	$ 817,775